Haters gonna hate.
Aussie 10 year government bonds hit a near record low in yields today (3.64%) after the “surprisingly low” CPI print (which I remind you dear readers, is NOT a measure of inflation). Remember, as yields fall, prices rise – as the above chart clearly shows.
I think it was, um, the entire investment industry telling the likes of departing Future Fund Chairman David Murray, former Treasury Secretary Ken Henry and head of the superannuation review Jeremy Cooper (who admittedly has a vested interest in wanting you to buy his fixed-interest style products) to stick to their own knitting when they warned that super funds had too small an allocation to bonds, but more importantly, too much in risky shares.
Even though the point is not about a difference in performance, but the realised volatility of the return to someone about to retire, here’s the ASX200 performance overlaid, down 11% since April 2010, or -5.7% annualised vs 9% annualised in capital gains on the 10 year bond above:
For reference, and for those of you who aren’t reading my Macro Morning updates (for shame), and finally, for those who think this is a bubble, that there’s nowhere else to go for Aussie bonds, here are developed nation bond yields in comparison:
10 year bond yields, with US in gold, German in green, UK in pink
Bit of a gap there?