Paul Singer: The bigger short

Paul Singer, the founder of Hedge Fund Elliot Management, speaking earlier this year says the risk-reward profile on buying long-end bonds is “pure madness” “because it is so tempting for rulers to debase their currency when they think it will help them repay their debts.” Singer questions the sense of investors who are lending money to Government’s at extremely low levels for long periods of time. Take for example the German 30-year bond, which has a yield of 0.62%. If the market yield rises to 1% the investor will lose 8.6%. If the yield increases by 2% - a level seen only several months ago - the investor will lose 27%. A 3% yield will lose 41% and a 4% yield will lose 51.5%. “Imagine any holder taking the risk, for a maximum yield of 0.62% for 30 years, of losing 40% or 50% of capital if interest rates simply revert to historically normal levels with a small amount of inflation, to say nothing of serious inflation or hyperinflation.” Article: (VIEW LINK)


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