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Category: Bonds

When Backtests Fail

Let’s say you’re building a diversified portfolio and want to include European high yield bonds in the mix. What are you plugging in for an estimated return today? If you’re like most investors, you’ll look to a backtest to provide the answer, asking the following question: what have the returns been historically? With data going […]

When High Yield Becomes Low Yield

In December 2008, as the “world was ending,” European junk bonds hit a record high yield of 25.97%. Forecasts of financial Armageddon were widespread, and few could envision a scenario in which subordinated bondholders would receive anything but pain. But the world did not end in December 2008. And over next five years, European junk […]

With all due respect to Warren Buffett, the number 1 rule in investing is not anything close to “never lose money.” In fact, the entire notion is absurd. Anyone who has ever invested in the history of the world has lost money at one time or another. Buffett himself lost close to 50% on two […]

The most interesting thing in markets today is the growing divergence in short-term interest rates between the U.S. and the rest of the developed world. While Japan and most of Europe have negative 2-year yields, the U.S. 2-year Treasury yield has moved all the way up to 1.38%, its highest level since 2009. At 0.71%, […]

  • Posted in Bonds, Fed, Markets
  • Comments Off on Is the Great Divergence in Central Bank Policy Sustainable?

Are Long Bonds Riskier Than Stocks?

It is one thing to know a truth; it is quite another to witness that truth firsthand. Most investors know that bond prices move inversely to interest rates and that the longer the duration of the bond, the higher the sensitivity to interest rates. But witnessing that firsthand since last July has been jarring to […]