Are bonds worth the risk now?

The Reserve Bank of Australia cut interest rates to record lows in order to stimulate the economy, was this a wise decision? We are already burdened with a hot property market showing signs of overheating yet still defying financial gravity. Do we need to fuel further speculation?

Forget about retiring if you are considering living off the safety of cash, a number of my colleagues opted to convert their retirement savings from a balanced fund that included Australian shares, international shares, bonds, fixed interest, infrastructure, derivatives, venture capital and cash to 100% cash at the bottom of the cycle locking in losses. But what about bonds as a safe investment in turbulent times?

If you are able to subscribe and lock in a low coupon rate to a newly issued bond then you have a distinct advantage when the bond expires as you get your capital back and a return along the way. But as we are entering a sustained low growth period, equities are more risky and capital preservation is the key and bonds in such a low interest rate environment could well be a good investment.