Märkte Insight: Ist jetzt der richtige Zeitpunkt, um bei Anleihen einzusteigen?

Markt insights indicate that the timing for entering bond markets may be ideal. The yields on long-term bonds have plummeted, generating headline-grabbing returns. Germany's 30-year Bund yield surged to nearly 3.80 percent, the highest level in 15 years. Similar surges occurred in the US and Japan. This has created a sense of unease, as high yields increase the debt burden of governments at a time when sovereign debt is ballooning.

However, investors must weigh the benefits of high returns against the risk of rising interest rates and currency fluctuations. Bond investors who hold to maturity avoid the risk of default, which is essentially non-existent in the case of Germany and Japan, even amid political turmoil in the US under President Donald Trump. Nonetheless, they must contend with currency fluctuations that complicate yield calculations.

The greatest risk for buy-and-hold investors in instruments like German Bunds is missing out on higher returns by entering too early. This is more a matter of psychology than actual losses. For investors who sell bonds before maturity or rely on conventional bond funds or ETFs that track bond indices, bond price movements are critical.

As bond prices and yields move in opposite directions, bond price volatility increases with longer maturities due to the extended bond duration. Germany's 30-year Bund, introduced in March last year, has fallen more than 11 percent since its placement, with yields surging from 3.10 to nearly 3.80 percent. Even the modest 0.2 percentage point yield increase over the past three weeks has come with a loss of over 2 percent in price.

Most bond fund managers tend to avoid long maturities and stick to intermediate-term bonds, yielding nearly three percent on German Bunds, which is the highest level in 18 years. The risk of price losses outweighing interest income is significantly lower than for longer-duration bonds. Overall, the US is shelling out a billion dollars in interest annually – a dangerous debt bet.