The client is worried about the possibility of Europe and Japan slipping into deflation.
1. Populate a Yield and Maturity Table and plot the Yield Curves of the US, Japan, Swiss and German government bond markets (Yield on the Y-axis, Maturity on the X-axis). Using current inflation rates, calculate the real yields of each government's 10-yr bonds in a table below the graph.
2. With reference to bond duration, why should an investor be cautious about holding long-dated Swiss bonds today? Of the sovereign government bonds plotted above, which country and which maturity would you choose to satisfy the fixed income allocation?