Buying Bonds? This International Bond ETF Has Outperformed U.S. Bonds for 10 Years
If bonds are getting less "safe" compared to stocks, does it make sense to buy "riskier" bonds?
Buying Bonds? This International Bond ETF Has Outperformed U.S. Bonds for 10 Years
Overview
An old rule of thumb in investing says that when stocks go down, bond prices go up. This idea is called "negative correlation" -- bonds and stocks tend to behave in opposite ways. But what if that is no longer true?
There's a lot of concern among investors that bonds are no longer "safe" compared to stocks. IMF research from February shows that bond returns have become more positively correlated with stocks since 2020 -- when stocks go down, bonds go down.
Details
One reason for this change could be the rising levels of government debt in the U.S. and around the world. More issuance of government debt means more supply of bonds -- and unless investor demand for bonds rises to meet that supply, that means interest rates will go up, and the price of bonds will go down.
Source
Originally published at www.fool.com.
