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Bonds: negative returns

 

The bond Market is bracing itself for darker times

Risks are piling up on many fronts and fears of recession are rising. The question is no longer whether it will happen, but when it will happen.

 

Central banks in action

The markets are putting a lot of faith in central bankers. While the FED (Federal Reserve System) has cut rates two times since 2008, the ECB (European Central Bank) is following suit and starting to repurchase bonds. Other central banks in the world are pivoting towards a softer monetary stance.

 

Historically low or even negative returns

Many bond yields have fallen to all-time lows and are now in negative territory. In other words, it has become a luxury to own bonds and investors accept that they will lose money if they hold certain bonds to maturity.

 

Over-optimistic equity markets

It is too early to abandon our short-term negative view on stock markets. There are however several factors limiting the downside risk, so we maintain our neutral view over the medium term.

 

There are still pockets of opportunities in the markets

Investors face the challenge of incurring risks while earning negative returns. Thankfully, there are still pockets of opportunities in the markets. Numerous EUR-denominated low- and moderate-risk investment solutions are available for EUR-based risk-averse investors.