Deutsche Bank examines whether government bonds have become the latest destination in a decades long cycle of policy driven asset bubbles. The paper argues ultra low yields, record debt levels, and secular stagnation fears may leave bondholders facing returns even if markets avoid a unwind.
Long-Term Asset Return Study: Bonds: The Final Bubble Frontier?
Deutsche Bank
Jim Reid
Research
104 Pages
Key Takeaways
Bond Bubble Risks: European government bond yields reached multi century lows, while average G7 debt to GDP climbed to the highest levels outside World War II.
Inflation Mispricing Concerns: US inflation has been lower than current levels 38% of the time over the last 100 years, challenging assumptions behind ultra low yields.
Equity Income Advantage: The dividends of most top global investment grade issuers exceeded their bond yields, while many non US equity markets remained below 2007 earnings peaks.
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