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GEAB 108

The monthly bulletin of LEAP (European Laboratory of Political Anticipation) - 15 Oct 2016

Investments, trends and recommendations (Oct 2016)

It is time to get rid of Western Sovereign Bonds 

Following the previous article on the topic of US Treasuries, it seems clear to our team that it is best to avoid US government bonds at the moment. In fact, there are some more reasons we recommend that you sell all your Western states bonds. As long as central banks like ECB, BoE or BoJ continue their quantitative easing operations, the yields of those bonds are at their lowest. This means that not only do they bring little benefit (or no benefit at all for the shortest maturities where zero or negative interest rates are offered), but their value can only decrease (the value of a bond varies inversely to its interest rate).  As one can see on the following chart, US Treasury bonds have volatility (roughly speaking this means a risk) almost as high as the debt of emerging countries, whilst providing a “safety cushion[1]” three to four times lower.

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In summary

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