Monday, October 20, 2014
The bond story in one graph
This single chart tells the fixed income story of the last 30 years.While there have be upwards jolts, the downward direction is still the same. The declining trend was not broken this year and those that did not follow the Great Rotation were rewarded. Inflation has been down, real rates are low and have been negative, and risk premiums have declined. There has not been a move to some magical mean risk premium so those who have forecasted an end to the long bond trade for asset allocation have been proved wrong. Still, are you being paid enough to hold long bonds until maturity? It is hard to be find that an acceptable risk reward.