We better get used to 'lower for longer'
Around the world five-year government bonds are paying paltry returns to their investors. Indeed, in some countries, rates are negative. In Germany the rate is -0.6 per cent, in Switzerland it’s minus 1.1 per cent, in the US it is +1 per cent and in Australia little more than the cash rate. Longer term bond rates are not much better. In Germany, the 30-year rate is just 0.4 per cent, which means that over 30 years an investor will receive a total return of just 12.7 per cent. Professionally managed pension and super funds that are investing in these bonds are locking their investors into very low returns for extremely long periods. Events such as Brexit only add fuel to the fire, causing investors to stampede towards security, driving bond prices even higher and yields lower. In their hunt for security and yield, investors are laying the groundwork for the next collapse in the value of their retirement savings. (VIEW LINK)
Roger Montgomery founded Montgomery Investment Management, www.montinvest.com in 2010. Roger brings more than two decades of investment, financial market experience and knowledge. Roger also authored the best-selling investment book, Value.able.