In an article published by NRC, Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics, discusses the developments in bond land. What is worth investing in?
For a while, government bonds were unattractive to invest in. The interest on the bonds was even negative, which meant that investors even had to add money to their investment if they wanted to hold on to the bonds. Fortunately, this is no longer the case and the interest on government bonds has risen above 1 per cent for the Dutch state.
However, according to professor Pieterse-Bloem, it is still unattractive to invest in government bonds. Because inflation is so high at the moment, the value of your investment decreases more rapidly than the return from the investment. If a bond has a term of ten years with a return of just over one percent while inflation in the past month was over ten percent, you can buy much less with that investment after ten years.
Alternative investments
Other investments are often preferred to government bonds. This is also evident in the portfolios that Rabobank manages for clients. Pieterse-Bloem: 'We have seen that movement - away from government bonds - in many individuals who invest with us. In the portfolios that we manage for clients, we now invest a large part of the capital in corporate bonds - as an alternative to government bonds.'
- Professor
- More information
You can read the article in NRC, 23 August 2022, here.