Are investors catching on that bond yields are actually bond losses?
*Financial Times, by Richard Milne, March 27, 2012:
''Investors hunt strategies in era of 'repression.'
'Financial repression' is here. And it is causing a headache for
investors.
It may be little more than a buzz phrase in the markets but a growing
number of strategists believe it accurately encapsulates how sovereign
debt markets are being distorted by central bank and government
policies that keep interest rates at historic lows.
Real bond yields, those adjusted for inflation, are at their lowest
since the 1970s in the US and UK. And if the effect of central
bank action is to prevent market mechanisms from responding to
inflation, an element of the repression, then this poses big questions
for investors' asset allocation strategies.
Andreas Utermann, chief investment officer at Allianz Global Investors,
is unequivocal: 'We are clearly in a phase of financial
repression. The central banks are clear about it: they are
manipulating the capital markets,' he says. 'It will mean continual
uncertainty.'
For banks, the big worry is that they become the captive buyers of
sovereign debt. Indeed, the evidence from Spain and Italy after
the European Central Bank's provision of cheap loans in December and
February suggests that is already the case. Much of the billions
of euros in cheap ECB money was used to buy eurozone government debt,
leading to a fall in bond yields.
At the same time, the search for haven assets, combined with
'quantitative easing' in the US and UK, means that yields are well
below inflation rates in the government bond markets of America and
Britain, as well as Germany.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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