Fear of the coronavirus has sent investors scrambling into safe-haven assets. At $1,582 an ounce, gold recorded its highest price since April 2013 this week. Money managers are also retreating to their habitual comfort zone: government bonds. US ten-year Treasury yields fell to a four-month low of 1.61% this week as prices rose. Germany’s ten-year Bund hit an eight-week low on -0.35%.
Last year was a great one for bond investors, says Carla Fried in The New York Times. The yield on ten-year US Treasuries fell from 3.25% in late 2018 to as low as 1.45% last September. The Vanguard Total Bond Market Index gained almost 9%. A mid-year panic that recession was around the corner triggered a rush into the perceived safety of US Treasuries. Three Federal Reserve interest rate cuts prodded more people’s savings into the bond market. Yet with many economists predicting a stronger global economy this year, “the great bond party” could be drawing to a close.
Investors still seem happy to extend credit to profligate states, says The Economist. Trump’s tax cuts have sent the US budget deficit up to 5.5% of GDP, “the largest of any rich country”. The economy hardly needs support: joblessness is at a 50-year low.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In the past, “bond vigilantes” would have punished such a debt binge by sending government borrowing costs spiking. Yet markets are still happy to buy ten-year US Treasuries at sub-2% yields. Part of the reason is that, scarred by memories of the Great Recession, American households have more savings to invest than in the past. US Treasuries also pay higher interest rates than those in Europe. The world’s “voracious appetite” for safe assets looks set to continue. Whether such loose fiscal policy is “economically sensible is a different matter”.
-
Which investments can I hold in a stocks and shares ISA – and which ones are banned?HMRC has a list stating which investments are allowed in ISAs, but sometimes investors, and even ISA providers, get confused by the rules. Here’s what you need to know when picking your investments.
-
Review: Andronis Minois and Andronis Arcadia – two Greek island idyllsTravel Andronis Minois on Paros and Andronis Arcadia on Santorini are two beautiful, authentic hotels on two different islands in Greece
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
-
Buy-to-let returns fall 59% amid higher mortgage ratesBuy-to-let returns are slumping as the cost of borrowing spirals.
