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Something to consider. The chart below shows the real yield on the 10 yr benchmark Australian Treasury 3% indexed bond. This figure was 0.29%pa as at today's COB:

[ATTACH]61461[/ATTACH]

Market implied 10 year inflation expectations are pretty much 2% per annum.

Hence, for a 30% tax rate, you are expecting to destroy real wealth by around 0.4% per annum after tax for investing in this thing. Remember, this is the best hedge against inflation surprise...which is enemy #1 for someone saving for a future life without personal exertion income as a main support - apart from not actually having enough savings. Nominal bonds are not the best hedge available. In other words, you have got to have more money actually in the market today than you expect to spend in nominal terms in the future.

Saving is supposed to be rewarded by increased real consumption at some future date. Today, it costs you to save. In order for this to make sense you need to refer to explanations like:
- everything else I could hold is bloody expensive and this is the lesser stupidity;
- there is a material risk of deflation despite the central expectation for inflation at about 2%pa; or
- I can't spend everything I own on restaurant dinners today because I simply can't eat that much. As a result, I have to invest in something to store my wealth for a future date even if I will be consuming less in real terms in future for the privilege of lending to the government.

Apparently, when you work it all out, we are also in full bore QE in real terms. Possibly more so than Japanese or European sovereign bond holders.

<blockquote data-quote="DeepState" data-source="post: 859741" data-attributes="member: 58698">Something to consider.&nbsp; The chart below shows the real yield on the 10 yr benchmark Australian Treasury 3% indexed bond.&nbsp; This figure was 0.29%pa as at today&#039;s COB:[ATTACH]61461[/ATTACH]Market implied 10 year inflation expectations are pretty much 2% per annum.Hence, for a 30% tax rate, you are expecting to destroy real wealth by around 0.4% per annum after tax for investing in this thing.&nbsp; Remember, this is the best hedge against inflation surprise...which is enemy #1 for someone saving for a future life without personal exertion income as a main support - apart from not actually having enough savings. Nominal bonds are not the best hedge available. In other words, you have got to have more money actually in the market today than you expect to spend in nominal terms in the future.&nbsp; Saving is supposed to be rewarded by increased real consumption at some future date.&nbsp; Today, it costs you to save.&nbsp; In order for this to make sense you need to refer to explanations like:- everything else I could hold is bloody expensive and this is the lesser stupidity; - there is a material risk of deflation despite the central expectation for inflation at about 2%pa; or- I can&#039;t spend everything I own on restaurant dinners today because I simply can&#039;t eat that much. As a result, I have to invest in something to store my wealth for a future date even if I will be consuming less in real terms in future for the privilege of lending to the government.Apparently, when you work it all out, we are also in full bore QE in real terms.&nbsp; Possibly more so than Japanese or European sovereign bond holders.</blockquote>

[QUOTE="DeepState, post: 859741, member: 58698"] Something to consider. The chart below shows the real yield on the 10 yr benchmark Australian Treasury 3% indexed bond. This figure was 0.29%pa as at today's COB: [ATTACH]61461.vB[/ATTACH] Market implied 10 year inflation expectations are pretty much 2% per annum. Hence, for a 30% tax rate, you are expecting to destroy real wealth by around 0.4% per annum after tax for investing in this thing. Remember, this is the best hedge against inflation surprise...which is enemy #1 for someone saving for a future life without personal exertion income as a main support - apart from not actually having enough savings. Nominal bonds are not the best hedge available. In other words, [B]you have got to have more money actually in the market today than you expect to spend in nominal terms in the future[/B]. Saving is supposed to be rewarded by increased real consumption at some future date. Today, it costs you to save. In order for this to make sense you need to refer to explanations like: - everything else I could hold is bloody expensive and this is the lesser stupidity; - there is a material risk of deflation despite the central expectation for inflation at about 2%pa; or - I can't spend everything I own on restaurant dinners today because I simply can't eat that much. As a result, I have to invest in something to store my wealth for a future date even if I will be consuming less in real terms in future for the privilege of lending to the government. Apparently, when you work it all out, we are also in full bore QE in real terms. Possibly more so than Japanese or European sovereign bond holders. [/QUOTE]

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