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BFI Capital
August 22, 2019

All Government Bonds Are Now At Negative Real Yields

There will be a time for TBF, but not now. The longer the maturity of any bond, the more volatile the price, up or down. We can see this with Austria's 100-year bond. [That 100 is no misprint]. The yield is down below 1% now. The chart below shows this. I can only call it "insane"!

Now, the yield is a mirror to the price. You'd expect the price to rise if a 100-year bond has a collapse in yield. And the price has soared by 80% in recent months. Look at this:

Gold, silver and miners have done so well, I'm not going to go back into bonds. Besides, at this rate, a 100-year bond will not have any interest rate at all. I don't know who is going to lend money over 100 years and only get 0.8% annually, or less.

Right now, pretty much every government bond is trading below the inflation rate in terms of yield. Even the US. The 10-year note is 1.71% as I write this. The inflation rate is higher than this. It is higher than the US 30 year's yield of 2.21%. It got as low as 2.14% yesterday. And that is almost where it was at the all-time lows in July of 2016.

I know I advised buying and holding TBF, the bond short. But what has happened is that the search for any sort of safe yield has seen investor money cascade into even the craziest government bonds, even this Austrian one paying 0.8% or less for the next 100 years.

What happens if and when that yield goes negative?

I think the alternative is precious metals. And this is what we are now seeing.

We are headed toward zero or even negative rates in America

We should prepare for the US president getting what he wants: rates near zero or even negative. If done for long enough, inflation should rear its head again, and investors will start to demand higher rates. At that time, I want to be back in TBF.

All government bonds are now at negative real yields, I mean that when you factor in the inflation rate, they are negative. The next step… not so far away... is for bonds to be at negative nominal yields, or below zero.

Rates cannot stay negative forever, especially those rates that are attached to longer term bonds. But you don't want to try to get in front of a crazy army on the march. You stand aside, wait for it to go by, and then, when the time is right, make your move.

Update: The Average Yield On All Eurozone Bonds Just Went Negative

"Chris Weber is a money manager and he has been sharing his insights with clients and readers since 1974. He regularly writes and publishes The Weber Global Opportunities Report, a subscription-only newsletter. With a focus on precious metals investing, the Weber Global Opportunities Report covers a variety of topics that should be of interest to Global Gold subscribers and clients as well."

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