Accounting & Finance
The Bond Maturity Crunch
In the months prior to the Global Financial Crisis fixed interest investors reveled in high interest rates offered by bank deposits, bonds and finance company debentures.

In the months prior to the Global Financial Crisis fixed interest investors reveled in high interest rates offered by bank deposits, bonds and finance company debentures.
Volatile equity markets were unattractive by comparison and money flowed out of managed funds and shares into what was perceived to be a safe, high yielding haven. Of course, the delight with finance company debentures soon turned to misery, but those who locked their money into long term bank deposits and bonds at that time have continued to enjoy high interest rates despite current market rates having fallen to historically low levels.
Five years on, a crisis now looms for those investors. Many are retirees who depend on interest payments to supplement their pensions. Once these high-yielding bonds mature over the next year or two, funds will be reinvested at much lower rates, perhaps around half of what they are currently earning. The effect will be more pronounced for those investors who did not spread their maturities to prevent the crisis that results when all funds mature at a time when interest rates are low.
The options for investors coming out of high-yielding bonds are limited. Some investors with a high need for income are looking to equities with high dividend yields as an alternative to low-yielding fixed interest. This is a rational solution providing those investors don’t need access to their capital for some time.
The reality is that when investment yields are low and your need for income is high, your standard of living can only be maintained if you are prepared to use up some of your capital. This is a sensible approach if investment capital is run down in a planned way with an eye on ensuring it will last until late in life. In the long term, yields will improve.
- Social Media3 years ago
Top 5 Advantages and Disadvantages of Social Media Marketing
- Management8 years ago
The man who destroyed his multimillion dollar company in 10 seconds
- Management3 years ago
The Five Common Materials Used to Manufacture Reusable Grocery Bags
- Management8 years ago
If you fail to plan, you plan to fail
- Management2 years ago
Unexpected Death of a Business Owner: What Happens Now?
- Accounting & Finance8 years ago
Do You Have a Poverty Mentality?
- Management8 years ago
Workforce Planning – Balancing Demand and Supply
- Innovation4 years ago
5 Ways How Globalization Impacts Small Businesses
- Management2 years ago
Have An Eye for Eyewear? Here’s How to Start Your Own Optical Business
- Management3 years ago
7 Essential Tips For Opening a Mechanic Shop
- Management2 years ago
The Importance of Presentation Skills in Business
- Management3 years ago
Pros and Cons of Offshoring