9. Synthetic Annuities for the Bond Market
This chapter looks at how a synthetic annuity can be applied to the bond market. In particular, for investors who are concerned about a rebound in interest rates—and a corresponding decrease in bond prices—this chapter includes an example of a SynA used to enhance yields and to hedge bond prices.
This includes a discussion of bond market dynamics and the attractiveness of a particular investment thesis, made even more attractive by how well the thesis fits with the natural adjustments inherent in a bond SynA.
This chapter ends with an excerpt from a paper by James Bullard of the St. Louis Federal Reserve Bank. I think he has an interesting perspective on future inflation and bond yields.