DAILY SKETCH - Bond investors have a very difficult time now

    • Daily sketch

The main indicator of the attractiveness of bonds is the yield to maturity (YTM), which indicates the expected return on holding the bond, if the investor will hold it until its maturity.

DAILY SKETCH - Bond investors have a very difficult time now

According to Bloomberg, the current average global bond yield to maturity is at an all-time low of 0.86%. This is a nominal yield excluding inflation. If we subtract the current global inflation rate, which is around 2%, the real inflation-adjusted average global bond yield to maturity would be deeply negative.

Bonds are therefore currently the most expensive in history as the global asset class. Therefore, we continue to believe that government bonds of relatively risk-free countries do not offer much room for solid appreciation in the medium term for the next five years.

Credit spreads on corporate bonds have also tightened enormously in recent months and are currently below their long-term averages, both for investment-rated corporate bonds and high-yield corporate bonds. We therefore believe that corporate bonds as the asset class are not very attractive at the moment as well.

 
 
Michal Stupavský
Investment Strategist at Conseq Investment Management, a.s.
 

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