Re:Pension funds may be wrecked in a future recession
by retube on Tuesday September 03, 2019 @08:13AM
(#20865758)
> Do people actually invest in these bonds?
Absolutely
> Why would they not put it in a safer, positive returning, investment like US bonds?
At a minimum you are exposed to the exchange rate with your domestic currency, and FX can be volatile - developed market currencies can easily move a few percent in one week - compare that to the Treasury yield of c.2%/year. PLus you are exposed to US macro-environment and interest rates which may be totally unrelated or risk-additive with respect to your investment strategy.
Even +ve yielding bonds are losing money in real terms. People buy german bunds and swiss govvies at negative yields as they are a save haven.
Absolutely
> Why would they not put it in a safer, positive returning, investment like US bonds?
At a minimum you are exposed to the exchange rate with your domestic currency, and FX can be volatile - developed market currencies can easily move a few percent in one week - compare that to the Treasury yield of c.2%/year. PLus you are exposed to US macro-environment and interest rates which may be totally unrelated or risk-additive with respect to your investment strategy.
Even +ve yielding bonds are losing money in real terms. People buy german bunds and swiss govvies at negative yields as they are a save haven.