Date
24 March 2017
Bill Gross suggests that anyone who hopes to replicate the remarkable investing returns of the last four decades would have better luck doing so on Mars. Photo: internet
Bill Gross suggests that anyone who hopes to replicate the remarkable investing returns of the last four decades would have better luck doing so on Mars. Photo: internet

Bond markets getting crazier than ever amid Brexit fears

In major government bond markets, the yields of the 10-year bonds of Germany, Japan and Switzerland have slipped below zero — meaning you lose money if you buy them and hold them until maturity.

Other government bonds, including those of developed economies and emerging countries, are also generally benefiting from the rush by investors to safe-haven assets amid the uncertainty over whether Britons will vote next week to stay in the European Union.

Renowned bond investor Bill Gross recently declared that the era of attractive returns from bond investments is over.

Gross said the trends behind the strong performance of bonds in the past — falling interest rates and an enormous expansion of credit — are coming to an end.

But faced with Brexit concerns, investors are once again ignoring his warnings and disregarding the fact that bond yields are already unreasonably low.

The yields on the 10-year government bonds of Italy (1.5 percent) and Spain (1.6 percent) are both below the yield of the 10-year US Treasury bond.

In the thick of the European debt crisis a few years ago, Italy and Spain were considered among the most vulnerable economies in the EU.

For investors who desperately need higher returns, the choices are limited.

If they have the stomach for risk, Brazil’s 10-year bonds offer a yield of almost 13 percent.

The Greek 10-year government bond trades at a yield of about 8 percent, India’s at 7.5 percent and Mexico’s at 6 percent.

– Contact us at [email protected]

FL

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe