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5 Sep 2017

Bonds: Asset Bubbles

Last week we presented a chart to remind investors that booms and busts in financial markets are not new, they repeat with constant regularity but the path is always different which is why speculation is a recipe for failure.

Have a look at these Government Bond Yields.

You can go back to ancient Babylonian times and you will still not find negative interest rates before now.

These negative interest rates have pushed up bond prices to all time highs and the danger is that interest rates will mean revert (eventually). The impact for example of just a 1% rise in interest rates on a 30 year bond paying a 3% coupon would be a 20% drop in price.

As Warren Buffet has repeatedly stated, be fearful when everyone is greedy and greedy when everyone is fearful.

Now is not the time to be greedy.


At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.

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