University of Minnesota - UMN Executive Leadership Insights
Who Needs Bonds Anyway?
Article

Who Needs Bonds Anyway?

They don’t pay much interest, and future price appreciation is so not happening. Still, they have their uses.

Larry Light
Chief Investment Officer, 2020
Read the article

Read or listen offline

Amazon Kindle
  • 0.5×
  • 0.75×
  • 1×
  • 1.25×
  • 1.5×
  • 1.75×
1×

Editorial Rating

8

Qualities

  • Analytical
  • Overview
  • Background

Recommendation

Low interest rates have become the new normal since the Great Recession, and central bankers have signaled their intention to keep rates low for a long time to come. Negative-yielding debt around the world exceeded $17 trillion in November 2020, yet investors flocked to bonds for safety during the COVID-19 pandemic. With interest rates at rock bottom, investors can no longer depend on sovereign and high-quality fixed-income instruments for returns. Financial journalist Larry Light looks at what the future holds for bonds in this informative report.

Summary

The US Federal Reserve’s low interest rate posture has contributed to falling bond yields in the credit markets.

During and after the Great Recession, central banks, led by the US Federal Reserve, adopted extraordinarily accommodative monetary policy that kept interest rates low. That stance, designed to stimulate economic growth, continues amid the COVID-19 pandemic.

Because bond yields move inversely to their price, Fed purchases of Treasury assets, as well as investor appetite for a safe haven, boost bond values and drive down yields. And with Fed chair Jerome Powell set to keep rates&#...

About the Author

Larry Light is the markets editor at Chief Investment Officer magazine. 

Comment on this summary