Bond returns: zero percent…or less!

The phenomenon of negative interest rates for sovereign bonds is widely known by the large public. What is less known, is the spreading to corporate bonds of higher quality (Investment Grade).

Currently 60% of corporate bonds issued in Swiss Francs have negative interest rates! And 90% of the same bonds return less than 1%.

This is probably positive for local companies, but the impact is destroying for our pension system. It is more and more difficult to generate returns in investments traditionally considered as save.

The situation is not better in Japan or for our European neighbors, where negative returns affect a large portion of corporate bonds. Only bonds in British pounds and US dollars elude this phenomenon. For how long? What about currency risk? All these factors need to be considered when selecting investments in bonds.