As Bill Gross of bond manager PIMCO said recently, the great 30-year bull market in bonds is over. Investors in bonds can only expect to get the minimal coupon yield on short-duration bonds – and the slightly better coupon minus capital losses on long-duration bonds. Simply put, bonds are likely to produce a negative real return, net of inflation, over the next decade. People often say a bond fully redeemed at maturity has no loss. This ignores the opportunity cost of owning low-yield bonds in a higher interest rate environment.
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