“Bonds promoted as offering risk-free returns are priced to deliver return-free risk””

Shelby Cullom Davis

The above quote serves as a stark reminder of the long-held belief that the bond market knows better. Warren Buffett, the Oracle of Omaha, echoed a similar sentiment in his 2012 letter about the prospects of so-called risk-free bonds. Lo and behold, how risk-free return has delivered return-free risk for investors (Chart 1).

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