Taps Coogan – August 22nd, 2023

Back in April we remarked on how unsurprising it was that the trillions upon trillions of euros of low/negative yielding Eurozone debt had turned into a terrible investment.

Along those lines, we now check in on the 100-year Austrian government bond. First launched in 2017, investors were buying these ‘century bonds’ with an effective yield of only 0.88% just three years ago. Those investors have been taken to the cleaners. Via Holger Zschaepitz:

Investors that bought at the highs in 2020 have seen close to 70% market-to-market losses.

Of course, those who bought these bonds with sub 1% yields were virtually guaranteed to get inflation adjusted losses. There has been a more than 40% loss of purchasing power in the Euro since its adoption in 1999 and, at that pace, there will be roughly 90% purchasing power losses on the par value when these bonds mature.

Nonetheless, for those buying the bonds today with effective yields around 2.8%, the chance of a very modest real return is higher though still hardly enticing.