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Bonds & The Invisible Thief

Watching Inflation Wreak Havoc in Fixed Income

Nicolas Rabener
10 min read
1 Jun 2020

SUMMARY

  • US bonds generated positive total returns in most inflation regimes
  • Returns were mixed when inflation was above 4%
  • Real returns were strongly negative when inflation was high

INTRODUCTION

Inflation is like cancer. It largely happens out of plain sight and requires focus to be noticed. The data is not easily understood and the perspective changes frequently. The outlook is difficult to predict. And it typically ruins people’s lives, in the case of inflation, when savings are destroyed, which can happen slowly or suddenly.

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