How can bad news create great news?
The trade war between the United States and China, the geopolitical tensions between America and Iran, the sluggish growth in Europe or the new UK Prime Minister in favour of Brexit… All those events may look like a big issue for investors. How will this news affect them?
In fact, as investors are looking for safe investment solutions, more and more investors are choosing to purchase government bonds, especially in stable, growing countries like France. For each currency, government bonds are the central market for medium and long-term interest rates. They determine the rise or fall of bond yields. OATs (Obligations Assimilables du Tresor, the French equivalent of the UK Gilts) on 10 years fell to a historic low – 0.41% last August. It has since increased a bit to reach -0.05% at the end of November but the rate is still negative.
So… how are investors benefiting?
The direct impact of such behaviour will likely reduce the interest rate on mortgages, this presents an exciting opportunity for real estate investors as prices are not expected to rise until summer 2020! It is even possible to grow your wealth with a loan when interest rates can be undercut the rate of inflation.