Cash & Bonds What Is a Bond Bear Market Anyways?

Bloody rain hasn’t let up for weeks here so amusing myself on the IPad. The following seemed like a good article on Bonds. Inflation, inflation, inflation .... NOT interest rates is the greater enemy of Bonds. Interesting times ahead after a decade of financial repression by Central Banks:

What Is a Bond Bear Market Anyways?


“This shows some huge losses. In fact, long-term government bonds lost 60 percent of their value after inflation in a drawdown that lasted almost 50 years. Even five-year bonds were down more than 40 percent in real terms. ...

Beyond increased volatility, the biggest risk to bond investors is the threat of rising inflation. It has been subdued throughout the economic recovery since 2009. If it does pick up, and the signs are there that it is doing so, this is a much bigger risk to bond investors than rising interest rates.”

 

https://www.rba.gov.au/publications/bulletin/2014/sep/pdf/bu-0914-8.pdf

The correlation between movements in equity prices and bond yields is an important input for portfolio asset allocation decisions. Throughout much of the 20th century, the correlation between equity prices and government bond yields in the United States and other countries, including Australia, fluctuated but tended to be negative. However, stock-bond yield correlations have been largely positive since the late 1990s, rose strongly during the global financial crisis and have since remained at a high level for a prolonged period. The more recent period of positive correlation in part reflects the pronounced and persistent effect of the financial crisis on the economic outlook, though it may also owe in part to an increase in the importance of uncertainty about real economic activity in driving both government bond yields and stock prices. Changes in US monetary policy look to have exerted an opposing force on the correlation at times, driving it lower.

The bonds below are the only type I have ever purchased, but I am considering financial bonds in reducing my risk versus maintaining the cash buffer.

 

China's $11 Trillion Bond Market Is Luring Foreign Investors