Government bonds: buy at 4-5% or wait?
Yields from 3.1% to 5% on 10-year bonds. Is it time to seek shelter or wait for rates to rise? The debate dividing investors.
English · Original discussion in Spanish · Published
Sovereign bonds: the boring refuge that's yielding again
10-year government bonds are once again offering serious yields: Germany at 3.1%, Spain at 3.6%, France at 3.8%, the US at 4.5% and the UK at 5%. After years of zero rates, the boring fixed-income asset has got its fuel back.
Time to seek shelter or to wait?
Buying bonds directly and holding to maturity avoids interest rate risk, which does affect funds: if rates rise, the fund loses accounting value. That's why a recurring strategy is to wait for rates to peak and then enter at higher yields. The other debate is more uncomfortable: 4-5% nominal barely covers inflation. For many, it's just a cushion, not an investment.
Diversify without drama
The consensus is that these yields serve to stabilise a portfolio, not to grow it. With stock markets at all-time highs and inflation proving stubborn, sovereign bonds are the refuge for investors who don't trust double-digit gains. The question of whether to wait six months or get in now remains; nobody can answer it without the risk of getting it wrong.
10-year government bonds are once again offering serious yields: Germany at 3.1%, Spain at 3.6%, France at 3.8%, the US at 4.5% and the UK at 5%. After years of zero rates, the boring fixed-income asset has got its fuel back.
Time to seek shelter or to wait?
Buying bonds directly and holding to maturity avoids interest rate risk, which does affect funds: if rates rise, the fund loses accounting value. That's why a recurring strategy is to wait for rates to peak and then enter at higher yields. The other debate is more uncomfortable: 4-5% nominal barely covers inflation. For many, it's just a cushion, not an investment.
Diversify without drama
The consensus is that these yields serve to stabilise a portfolio, not to grow it. With stock markets at all-time highs and inflation proving stubborn, sovereign bonds are the refuge for investors who don't trust double-digit gains. The question of whether to wait six months or get in now remains; nobody can answer it without the risk of getting it wrong.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (21 replies).
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