Paul Singer: "This is the biggest bond bubble ever"

According to asset manager Paul Singer, today we are dealing with the Largest bond bubble in history. He doesn't understand why many investors still consider government bonds to be safe havens, because risk and return are completely out of proportion.

Right now, you're paying a record amount for bonds, while the expected return is close to zero percent. If interest rates ever rise again, the losses on government bonds will be enormous. And there is no guarantee that interest rates will remain at their current extremely low levels forever.

Investors should be warned about the risks of government bonds, Singer writes in his newsletter.

"Everyone is in the dark right now. Experience doesn't mean much anymore and blind faith in this market can be fatal. An eventual crash in this market will come as a surprise and will have major and intense consequences. Think of uncontrollable inflation."

Bond bubble

Paul Singer manages $28 billion in assets for Elliott Management, a fund he even set up in 1977. He writes in his newsletter that since then he has never experienced such a strange situation as today in the bond market. More than $12 trillion in government bonds already have negative interest rates, and that seems to be increasing by the day. To better diversify the assets under management, Singer has added some extra gold to the portfolio.

Central banks are reinforcing this trend by buying government bonds themselves, to the extent that this is still possible. The Bank of Japan and the Bank of England are already struggling to get enough debt out of the market, while it is also becoming increasingly difficult for the ECB to buy 'safe' government bonds. When interest rates fall, bond prices rise, while rising interest rates cause bond prices to fall.

Bill Gross

Singer's words echo those of asset manager Bill Gross. He, too, is of the opinion that government bonds should be risky and that so-called 'hard assets' such as land, real estate, art and precious metals are currently the preference enjoy. Earlier this year, he compared the bubble in government bonds to a supernova that will burst at some point. If things really go wrong, it's not a bad idea to own some physical gold.

Paul Singer: "This is the biggest bond bubble ever"