The return of the 50-year bond

Andrew Allentuck was kind enough to quote me in his piece The return of the 50-year bond:

U.S. pension fund regulation has put more weight on long bonds in pension fund portfolios, encouraging them to buy more long-dated government debt to match long-term liabilities. Canadian regulators are taking a similar course, notes James Hymas, president of Toronto-based Hymas Investment Management Inc. All of this has pushed up the prices of mid- to long-term bonds.

The reversion to historical interest rates, which parallel inflation, has to take place – someday. As Hymas explains: “The current situation of low bond yields, which barely cover inflation running at 1.5% per year, cannot last. Doing that with 50-year government debt is not prudent for anybody who does not need half a century’s worth of liquidity.”

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