Are bonds for income anymore?

Maybe not, but they haven't outlived their usefulness.

Christopher Davis 16 May, 2016 | 5:00PM
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Note: This article is part of Morningstar's May 2016 Income Investing Week special report.

If they ever won a million dollars, my grandparents said they would stash their newfound wealth in a safe investment and live off the interest. When they first crafted this plan more than three decades ago, it wasn't implausible. But a million dollars isn't what it used to be, and neither is the interest you can earn off it.

Indeed, long-term Canadian government bond yields stand at just 2%, far from their 18% peak in September 1981. These yields look even skimpier in inflation-adjusted terms. The 1.5% expected inflation rate implied by long-term real return government bonds leaves investors with a 0.5% real yield.

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About Author

Christopher Davis

Christopher Davis  Christopher Davis is Director of Manager Research at Morningstar Canada.

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