Aussie Bonds Provide Spectacular Returns In 2008

Post by NeilMc on December 29, 2008 · Under Wealth Management, investments · Comment

Research provided by wealth managers AMP Capital Investors suggests that Aussie bonds, which have been serial underperformers for most of the last decade when compared to their equity brethren, have provided relatively spectacular returns this year.

The Australian Wealth Manager reckons that Australian Bonds will deliver a 14.4 per cent return for the year which would double the 7.5 per cent return that cash delivers.

“The Reserve Bank’s interest rate cuts, fading inflation worries and a rush for safety by investors pushed yields on government bonds down sharply and this provided strong capital growth from bonds for investors,” AMP Capital Investors chief economist Shane Oliver said.

Listed property trusts suffered the most this year, with Australian equity market not that far behind. Despite falling global share markets, overseas shares dropped only 25 per cent because the falling Australian dollar increased their value.

Dr Oliver said the short-term outlook for most assets was uncertain but investors should remain calm and not make rash decisions. “Selling financial assets now will only turn a paper loss into a real loss with no hope of recovery,” he said.

“History tells us that the sort of extreme falls in shares and other financial assets seen over the last year are normally followed by good rebounds over subsequent years.”

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