https://preview.redd.it/bbdx331e1lq91.jpg?auto=webp&s=d70ce2d66adc9b20dde27235c7458d127dd471b1
This is not some sh*tcoin or Ponzi-stock, this is the UK Government’s 40-yr bond. Imagine being close to retirement & buying this close to 100 in Dec last year because you were told “stocks are too risky”, and now sitting with it at 25.
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Don’t you get the full value of the bond back at year 40 regardless?
I’m confused. Is this a bond fund you mean? If I bought a bond for fixed retirement income I don’t give a fuck about this chart? Am I the dumb one here or is OP?
This sub doesn’t know shit about bonds.
Why would one buy 40-yr bond when close to retirement?
That’s a pretty shitty chart, but let’s be honest: only a regard would buy a 40 year bond when they’re close to retirement.
Well, you’re probably not buying a 40 year bond heading into retirement. You’re probably buying bond portfolio with shorter duration.
If you were happy with the yield when you bought it and you hold to maturity the price doesn’t effect you.
You aren’t supposed to buy bonds to speculate though, right? The point of bonds is in the interest/coupon. I supposed those were fixed at the time of purchase, are they variable rate?
Your very confused. None of what you wrote makes sense
I’m from the UK, here’s my $0.02;
The BoE have stepped in to calm the UK Gilts market, the UK equivalent of US Treasuries by partaking in QE (buying bonds to spur economic growth via increasing money supply) alongside Kwasi Kwarteng’s unveiled ‘mini budget’ of ~£160bn on tax cuts which I’ll touch on later. This is a HUGE policy mistake made by the BoE, what they should’ve done imo is to hike interest rates more in one go than do this to force real yields. This now leaves ordinary citizens, and the UK itself liable to even more inflation considering we are already at ~10.1%, in comparison to the US at ~8.5%. Whilst the Fed can focus on at least trying to tame inflation which will be far from easy, the UK will be swindled with this inflation problem for about another year.
The BoE intervening the bond markets via QE is akin to jumping in front of an oncoming train that is self started. This all started from high inflation in the first place, and QT (known as quantitative tightening, which where central banks let their bonds mature as a way to reduce their balance sheet, therefore reducing money supply) was the way out of this. But now the BoE have done QE whilst hiking interest rates, which is very very stupid and confusing to me. But why did they do this?
Insurance, pensions, bonds, and the UK markets in general seriously disagreed with the plans of his ‘mini budget’ which was unveiled on Friday. The IMF stepped in as UK based pension funds are on the verge of getting margin called. One of the big 3 credit rating agencies, Moody’s, has warned the UK that unfounded tax cuts are a credit negative, and the IMF have also openly criticised the UK by way of questioning the credibility of UK Government’s fiscal strategy. Moody’s said in layman’s terms that the “credit negative” unfounded tax cuts will lead to higher deficits amid rising borrowing costs, a weaker economic outlook and intense public spending pressure. Pension funds are important as they handle the money in which we will receive should you retire – if they go bust, it will not only ruin people’s pension they are entitled to (and their lives) but it could also have a potential ripple effect depending on what markets these pension are heavily invested in. They are in this situation as anyone who has either traded institutionally will know about the 60/40 rule, where 60% of your money is invested in risk-on assets (equities) and 40% of your money is invested in risk-off assets (bonds) in which they serve as a hedge in the event that one does decline.
This year, bonds have not been a good hedge against inflation, which is now getting hammered in the market and Gold, another well-known inflation hedge has also been falling at an alarming rate as well, leaving pension funds in the UK clueless on how to protect themselves against a UK crash (or situation we are in now). Whilst I understand that the Bank of England have done this, it shows you that they prioritise financial institutions over the ordinary people of the UK – which is terrible but the institutions will love it.
However, the knock on effects from this will be interesting. The EU may be forced to do something similar to the famous QTQE (quantitative tightening + easing) were hinted by Lagarde, the president of the ECB. I don’t expect the US to follow suit but the dynamics between the GBP/UK & EU/US would be interesting to see till the end of the year.
Bank of England bond yolo: sell at £100, buy back at £25 a year later. That’s how to fund tax cuts.
The OP thinks someone close to retirement would buy a 40yr fixed bond. Or that someone looking for fixed income would worry about the price of the bond.
OP also can’t tell the difference between a bond and a bond fund.
I should really stop reading what people post here. Turns out they are utterly clueless
You don’t understand the concept of fixed income. The interest payments don’t change. Only % relative to price. If you buy this for retirement you’re buying it for the interest payments.
Not close to retirement anymore. Wah, wah, wahhh
In the UK they still have defined benefit pensions. Pension managers (and the BoE) are the only ones who buy this crud. Higher long term interest rates lower the PV of their liabilities. You couldn’t make it up but the only people who hold this bond will probably be celebrating right now because though they’re down MtM, the PV of their liabilities is probably down more.
You trade stocks (unless they pay good dividends)
You invest into bonds because they pay interest in specific intervals and fixed rate.
It doesn’t matter how much a bond is worth if you are not trading it, which you shouldn’t do anyway. If it falls that low and stays that low – you just commit to 40 years investment, either for you or those you specify in your will.
Please learn how bonds work. Thanks.
Imagine putting in a massive short position anticpating this insolvency event would spill into the US Stock market that is already barely hanging on to support only to get cucked by the Central Bank of England. Investing isn’t fun.
Shoulda bought something safe like bbby puts.
Imagine being close to retiring and investing in a 40 year bond.
No one in their right mind buys long term bonds when interest rates are extremely low. There is zero upside and huge downside risk.
if you are near retirement, you shouldnt buy 40yrs bond
Op is stupid af
Okay now I feel bad for all the boomer jokes.
“Buy the DIP”
So cash is king
puts on…
*checks notes, furrows brow*
The… whole fucking UK? Basically, just short the whole ass FTSE100 on Monday, that shit’s gonna be a BLOODBATH. Our energy prices are going to go from “ridiculous” to “food or energy, pick one” on Saturday, so y’alls bears are gonna have a fucking FEAST.
Wait I thought Fiat currency was a Ponzi and the gold standard was the way
This is what happens when you detach yourself from the continental economy.
Imagine being so dumb you let conservatives run your country.
40 year bonds are bought by life insurance companies to pay claims on people who are currently 40 years old or less.
They are extremely risky of you need money in the short term.. this isn’t surprising at all.
Why would someone close to retirement buy a 40-year bond? Modern medicine has improved but damn expecting to live to 110 is a bold assumption
The UK ruined their country and economy and blamed everyone else for it. Crazy
Now is a good time to buy!
Sooooo…. Buy now? Lol