A.I.M. Users Bulletin Board

[ls7550]

In Euroland the moneymarket and bondmarket have been 'destroyed' and QE will continue for a few more years

Grabbing historic 5 year Government Eurobond yields from http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=143.FM.M.U2.EUR.4F.BB.U2_5Y.YLD and forming a 5 year ladder not marked to market i.e. the average of the current and past four years 5-year-yields (which is generally the average yearly reward you'd receive assuming each bond was being held to maturity) and the figure for current year = 2.65% 2015 return - which looks to me to be around average (somewhat similar to US, UK etc.).

Are you saying such Euro bonds aren't investable?

YYYY-MM	5YrYield     5YrLadder 
 1970-01	7.37	n/a 
 1971-01	7.54	n/a 
 1972-01	7.12	n/a 
 1973-01	7.84	n/a 
 1974-01	8.54	7.68 
 1975-01	9.60	8.13 
 1976-01	8.67	8.36 
 1977-01	10.16	8.96 
 1978-01	8.71	9.14 
 1979-01	9.12	9.25 
 1980-01	10.43	9.42 
 1981-01	11.84	10.05 
 1982-01	14.20	10.86 
 1983-01	11.75	11.47 
 1984-01	11.59	11.96 
 1985-01	9.94	11.86 
 1986-01	9.44	11.39 
 1987-01	7.91	10.13 
 1988-01	8.21	9.42 
 1989-01	8.81	8.87 
 1990-01	10.59	8.99 
 1991-01	10.98	9.30 
 1992-01	9.75	9.67 
 1993-01	9.14	9.85 
 1994-01	5.94	9.28 
 1995-01	8.60	8.88 
 1996-01	6.09	7.90 
 1997-01	4.96	6.95 
 1998-01	4.61	6.04 
 1999-01	3.30	5.51 
 2000-01	5.14	4.82 
 2001-01	4.67	4.54 
 2002-01	4.48	4.44 
 2003-01	3.40	4.20 
 2004-01	3.37	4.21 
 2005-01	2.92	3.77 
 2006-01	3.10	3.46 
 2007-01	4.02	3.36 
 2008-01	3.86	3.45 
 2009-01	3.15	3.41 
 2010-01	2.72	3.37 
 2011-01	3.64	3.48 
 2012-01	5.68	3.81 
 2013-01	1.79	3.40 
 2014-01	1.64	3.09 
 2015-01	0.48	2.65

UK gilts (equivalent) are liquid - can be sold in the secondary market. For less liquid, such as from high street banks we can buy 5 year bonds that are 'protected' (€100,000 EU wide standard protection per provider (bank group)). Spread a ladder across multiple providers increases the overall protection. Typically such bonds are fixed term, must be held for the full 5 years with no early redemption - and typically pay a higher yield accordingly.

With one bond, 20% of total maturing each year with no capital loss and rolling into higher (or lower) yields, such a ladder typically tracks inflation over time, but in a somewhat delayed like manner (takes longer to roll up, and longer to roll down).

Somewhat like having 5 year yield reward with T-Bill like risk assuming you don't need full liquidity.