Why it doesn’t make sense to hold bonds

Investor demand for bonds is very high. This column argues that this is surprising because under almost any likely inflation scenario, including central banks merely hitting their target inflation rates, bondholders suffer large losses. The beneficiaries are sovereign and corporate borrowers; the losers are pension funds, insurance companies and some foreign exchange reserve funds. Meanwhile, the systemic risk from a bond crisis is increasing.

Relevant Posts

• Elizaveta Krylova, (2016), “Determinants of euro-denominated corporate bond spreads”, ECB Working Paper 1912, June 2016
• Blanchard, Olivier, Mauro, Paolo, Acalin, Julien, (2016), “The case for growth-indexed bonds in advanced economies today”, Voxeu, 16 February