Government bonds may no longer be ‘safe’ assets, investors warn

4545456666.jpgInvestors pushed into buying government bonds that won’t mature for many years, seeking to bolster meagre returns since the financial crisis, could now face big losses if central banks raise interest rates.

As yields have collapsed toward zero due to slow economy growth, falling inflation, super-easy monetary policy and central bank bond-buying, investors have sought bonds with longer and longer maturities to eke out extra basis points in return.

Governments keen to lock in record-low borrowing rates have obliged by issuing longer and longer debt. A spate of 30-year and 50-year issuances have seen average maturities rise to 9.8 years, from 8.5 in 2011, according to JP Morgan’s global government bond index – a huge shift for the multi-trillion dollar market.

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