Bond bubble

With bond yields and interest rates at an all time low, investors are chasing yield where they can find it. Panama has recently sold $750m of 40 year bonds at a yield of 4.3%. While the currency risk isn't there as the Balboa is the same as the USD, when you look at this even half carefully  there is an enormous amount of optimism baked into this pie.

As an investor, for a miserable 4.3%, you are expecting the Panamanian government in forty years time to pay you back 100 cents in every dollar. The president of that time is probably still in nappies. Inflation will have to be almost non-existent and Panama behave more or less like Switzerland to make it all work out fine both in the near and forty year term.

Likely? I don't think so.

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