A “powder keg ready to blow” – That’s what Bloomberg calls long-term government bonds in a great story today. It notes that global bond indices now sport record-high “durations,” a measure of the risk of investor losses from changes in interest rates. We’ve also seen record-high issuance of long-term debt as well as record inflows into funds that invest in bonds. All of that certainly provides a ton of dry tinder in search of a match.
My advice? Same as it’s been for a while. Favor bond ETFs and mutual funds that hold shorter-term bonds, rather than longer-term bonds. Think three years or less when it comes to average duration, or average maturity – two measures of interest-rates risk that every fund website and/or prospectus lists.
