Long Term Bonds Are Beginning To Erode The Returns Of Bondholders.

Investors expect the weaker central bank to postpone tightening monetary policy as investors expect weak economic activity to bet on investors in longer-term bonds.

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The asset purchase plan implemented by the Bank of Japan, the Bank of England and the European Central Bank has pushed the average maturity of corporate bonds in the United States to a new high of 11.3 years in August.

Quoted Goldman Sachs analysis reported that if the yield of long-term assets suddenly rose, investors may be in deep sea, and as long as the interest rate has a modest rise, it may cause the bond portfolio to be slaughtered.

The jump in yields on longer-term bonds has begun to erode the return on capital of bondholders.

Although the sudden rise in interest rates may not necessarily lead to systemic shocks, the long-term prospects for price sensitive investors are uncertain.

Goldman Sachs calculates that if

A rise of 1% could lead to a loss of $1 trillion and 100 billion in the Barclays U.S. Aggregate Bond Index, which is unprecedented in scale.

The estimate is mainly reflected in the US dollar pricing of investment grade cash bonds.

But Goldman Sachs wrote that the Bank predicted that bond selling would be further deepened, and that the risk of such risk would be less likely.

Today, the average maturity of global bonds is two times more than inflation adjusted level in 2009, three times that of 1994.

Goldman Sachs pointed out that once interest rates rise, the risk of loss is even greater.

According to the article, according to the Pentti Boba Clay global composite index, by the middle of October this year, the effective average duration of the global bond market has increased from 6.6 years in January to 6.98 years.

Goldman's $1 trillion loss estimate is based on US dollar pricing.

The level of cash bonds can therefore be used as a conservative risk estimate for the capital market.

The tug of war between valuation risk and dove central bank will promote the short-term yield of long-term bonds.

Gross (Bill Gross) also warned that a slight fluctuation in interest rates could stifle the capital gains of bond portfolios.

Goldman Sachs Group on Monday reiterated its forecast that the long-term US bond yields could suddenly rise in the next few months, and pointed out that the 10 year US bond yield is too high relative to the 1.5 standard deviation.

In the 1990s and 2006, when the Federal Reserve tightened its policy cycle, the price of long-term bonds declined more than short-term bonds.