BRIAN KANTOR: Low interest rates are bad news for global bond savers
Yields on inflation-protected securities have plummeted since the global financial crisis
If we are to take seriously the signals from global bond markets, savers should expect a decade or more of very low returns. The decline in bond yields due to mature in 10 years or more accelerated dramatically during and after the global financial crisis.
Less expected inflation is part of the explanation for these lower yields. But there is more to it than that. Yields on inflation-protected securities — those that add realised inflation to a semi-annual payment — have declined to rates below zero. Before the crisis the US offered savers up to 3% per annum risk free for 10 years, after inflation. The equivalent real yield today is a negative 0.11% per annum...
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