Geffen: Bondholders face 40% loss when interest rates rise

Robin Geffen, CEO of Neptune Investment Management, has warned bond investors should be bracing themselves for severe losses when the interest rate cycle turns.

Geffen (pictured) said the long end of the bond market will fall between 30% and 40% when interest rates and inflation normalise. "The inevitable consequence of QE is that at some stage we are going to get high inflation, as central banks cannot print money forever to stimulate growth," he said. "When the cycle turns and we move from where we are now to interest rates rising to 5% or 6%, inflation will be around 6% to 8%. "Under this scenario, the long end of the bond market will go down 30% to 40%." Geffen added even a small rise in interest rates, of 1% to 2%, would punish bon...