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If inflation is dead, bonds are totally in your best interest


If inflation is dead, bonds are totally in your best interest

While it may appear crazy to ‘invest’ in negative-yielding bonds, there is method in their madness

Chris Gilmour

Bond investing isn’t easy these days, with interest rates in many countries being low or even negative and previously popular inflation-linked bonds falling out of favour.

The so-called “Japanification” of the global bond market continues unabated, with long bond yields offering investors extremely low or even negative yields. This new order has been in place since the 2008 global financial crisis and refers to Japan’s inability to kick-start its moribund economy via low or negative interest rates. It has since been extended to many other countries, notably in Europe, with a similar lack of success.

Futuregrowth portfolio manager Wikus Furstenberg says Japanification is derived from deflation and an ageing population, which led to the “the lost decades” since the early 1990s of the Japanese economy. “The bubble burst, people became cautious and the economy got stuck in too low a gear to stop prices and interest rates from falling,”  wrote The Economist on August 22 2019...

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