Government Bond Investment

Everyone thinks government bonds are “risk-free.” They’re not. And the market has been quietly telling us this, if you know where to look. Everyone says government bonds are the safest investment. But here’s something most people don’t realize: “Safe” doesn’t mean what you think it means. Let me explain this in the simplest way. Imagine you lend money to someone. Now you get a little worried… So you go to a third person and say: “If this person doesn’t pay me back, will you cover my loss?” You pay a small fee for that protection. That fee = how risky the borrower is. If the fee goes up -> risk is increasing. Now here’s the interesting part: People do this not just for companies… They do it for countries too. And recently, the cost of insuring Saudi Arabia’s debt has been going up. Which tells us: Even countries are not seen as 100% risk-free. “But wait… aren’t government bonds the safest?” Yes… but only in one way. They are considered safe because: Governments can collect taxes Governments can print money So the chance of them not paying back is very low. But that’s only one type of risk. There are other risks people ignore: 1/ Inflation risk If prices go up faster than your returns -> you actually lose money 2/ Interest rate risk If interest rates rise -> bond prices fall 3/ Market risk Sometimes bonds fall at the same time as stocks And this is where it gets interesting. We’ve all heard: “When stocks fall, bonds protect you.” That’s usually true. But not always. In situations like: Rising oil prices High inflation Government spending going out of control Something different happens. -> Investors demand higher returns -> Bond prices fall So instead of protecting you… Bonds start behaving like risky assets. This is why the famous “60% stocks + 40% bonds” strategy doesn’t always work. Because the world is not stable. And markets don’t follow fixed rules. Here’s the simple takeaway: No investment is always safe Every asset works well in some conditions And struggles in others So instead of asking: “Which asset is safest?” A better question is: “Safe under what conditions?” Because real investing is not about finding one perfect asset. It’s about building a mix that can survive: Good times Bad times Unexpected times In simple words: Don’t chase “safe”. Understand “risk”. Curious to know: What do you consider a safe investment? Tell me in the comments below! Follow Sanjay Kathuria, CFA for more!

We're Having One of The Worst 10-Year Runs for Treasuries This Century The 10-year annualized return for the iShares 20+ Year Treasury ETF (TLT) currently sits at -0.94% (per year). That means investors in long-term government bonds have lost nearly 1% per year for a decade, even after accounting for income. That’s a dramatic departure from the long-term average of 5.34%—and it’s left many wondering: Do bonds still make sense in a diversified portfolio? Here’s what’s often overlooked: Bonds are one of the few asset classes where we can reasonably forecast future returns. Unlike equities—where even long-term outcomes can be highly unpredictable—bond math gives us a powerful tool: the current yield. While current yield doesn’t tell us much about what will happen over the next 12–24 months, it does a surprisingly accurate job of predicting average annual returns over the next 10 years. So what’s the yield on 20-year Treasuries today? ➡️ 4.93% That suggests long-term bond investors buying today could see returns near 5% annually over the next decade—a strong reversal from the last 10 years. Yes, recent returns have been dismal. But for long-term investors, that pain may have set the stage for much better outcomes ahead. This is your reminder: Don’t abandon any investment based on backward-looking results. Focus on where we are today—and what the math says about the road ahead.

15 Steps on How to Buy A Government Bond in Kenya (Save This for Later) 1. Open the CBK DhowCSD platform either through the web portal or by downloading the DhowCSD app from the Google Play Store or Apple App Store. 2. Follow the instructions on the DhowCSD portal to open a CSD account. 3. Review the available Treasury bonds, which are offered for a set number of years, ranging from 1 to 30 years. 4. Understand the types of Treasury bonds: - Fixed Coupon Treasury Bonds have an interest rate that remains the same throughout the bond's life, meaning semiannual interest payments will stay consistent. - Infrastructure Bonds are tax-exempt bonds used for government infrastructure projects. - Zero Coupon Bonds are sold at a discount with no interest payments; these are typically short-term issuances. 5. Check the details of the available bonds, including the bond’s tenor (the length of time remaining until a bond's maturity), the coupon rate (the interest payments you will receive every six months, typically ranging from 11% to 20%), and the minimum investment amount (usually KES 50,000 OR KES 100,000). 6. Log in to the DhowCSD Mobile App or Web Portal and navigate to the 'Auctions' menu. 7. Select your preferred bond and click on 'Create Bid.' 8. Choose either a Competitive or Non-Competitive bid. 9. Enter the amount and yield (for Competitive bids). 10. Specify the source of funds and accept the legal terms. 11. Place the bid and confirm submission. You will receive an email notification upon successful submission. 12. Note that T-bond auctions are held every Thursday, with results published on the CBK website and social media channels. 13. Check your individual auction results via the DhowCSD portal under the "Transactions" tab. 14. Ensure payments for successful T-bond bids are made by 2 PM on the settlement date (the Monday following the auction). 15. Provide your CSD Account Number, Amount Payable, and payment key when making the payment. NOTE: While the platform itself does not charge fees for account creation or maintenance, there are transaction fees associated with the purchase and sale of securities, which are typically handled through commercial banks Source: Central Bank Website (https://lnkd.in/d29sARJ7)

Some investors have been severely burned by owning government bonds in recent years, as the rapid rise in interest rates dealt a hammer blow to the value of long dated gilts. The FTSE all gilt index remains down about 25% since the start of 2021. By 2021, real yields on UK government bonds were so low that they were flashing a clear warning sign. Since then though nominal and real yields have climbed as interest rates rose. This has left nominal and real yields on UK 5 year gilts looking more attractive than they have done for most of the last decade. With today's jobs report showing ongoing labour market weakness in key cyclical sectors of the economy, interest rates could end up being cut by more than is currently priced in over the next year. However, there are valid concerns around the long-term trajectory for government debt. With QE also no longer mopping up much of the supply of government bonds, there is a risk that long dated gilts might not prove as reliable a portfolio diversifier as investors hope, even as the economy slows. Investors looking for portfolio diversification from fixed income may therefore be better off looking at shorter dated gilts, which tend to be more driven by near term market interest rate expectations than longer dated gilts.

Safe havens - Not where you thought Happy Easter All Chinese government bonds have quietly become one of the few assets actually behaving like a safe haven in this war‑driven macro environment. From a global CIO lens, it’s striking that the most reliable ballast is coming from Beijing rather than the traditional trio of gold, the dollar and US Treasuries, all of which have been far more volatile when we needed them most. China is still the world’s second‑largest economy, yet its 10‑year yields sit around 1.8% versus roughly 4.4% in the US – a different regime, anchored by very low inflation rather than aggressive rate hikes. At the same time, yields there have edged down as others sold off, meaning prices have held up or risen just as global borrowing costs jumped. In other words, these bonds have actually done the job we hire safe havens to do: preserve capital when the headlines turn ugly. Under the surface, the market is buttressed by huge domestic demand and capital controls that keep savings onshore, creating a persistent local bid for government paper. With property in crisis and equities volatile, Chinese institutions have effectively “crowded into” sovereign bonds as their primary low‑risk asset. That domestic sponsorship makes the market far less hostage to global hot money than US Treasuries, bunds or gilts. Macro‑wise, China is also more insulated from energy shocks than most. It produces much of what it needs, tops up with cheap imports from Russia and others, and runs large strategic reserves – all of which helps keep consumer inflation subdued. With inflation low and growth fragile, the central bank has little incentive to follow the Fed into aggressive tightening, which supports a more stable rate environment and, by extension, a more stable bond market. For global multi‑asset investors, the real point is this: Chinese government bonds are behaving as an uncorrelated, defensive sleeve at a time when traditional hedges have disappointed. They are not risk‑free – FX, governance and access all matter – but they deserve a serious look as part of the safe‑haven toolkit, not an afterthought on the emerging‑market fringe. #ChinaBonds #SafeHaven #FixedIncome #Macro #Geopolitics #AssetAllocation #Diversification #WealthManagement #CIOView #EmergingMarkets Chinese government bonds emerge as lone war haven - https://lnkd.in/eiBK-crv via @FT