PROBLEMS & SOLUTIONS

Low Yields to Investors in the Present Bond System:

In the present Bond system, world benchmark nominal yields, without considering inflation, are at an average of 2.21% for the past 10 years; for the 1-year, 10-year & 30-Year US Treasuries. This yield is far too low! The benchmark 10-year US Treasury’s average nominal yield was at 2.32% for the past 10 years.

Higher Yields & Lower costs in the Proposed BondCoin Ecosystem: 

In the proposed Bond Ecosystem, compared to the present system, in provably calculated examples, investor yields in Product-2, Investment Grade (IG) Bonds (BC-Ella) as well as in Product-1, High Yield (HY) Bonds, (BC-Hi) were considerably higher. (Investor Yields 4.49% higher yields for BondCoin High Yield, (BC-Hi). These higher yields are obtained while lowering issue costs (2.18% lower issue costs for BondCoin High Yield, (BC-Hi).

Inadequate Capital Protection – Present System: 

Principal values in bonds diminish in high yield scenarios and capital is eroded; the variance range being far too high - 822% variance in US Treasuries 10-Yr yield, (4-Year High/Low from $0.54 to $4.98). Bausch Health Americas Inc. 104% variance, GE bonds 69% variance, Dow Chemical Co. 59% variance, Apple 19% variance, all in 3 years.

An Algorithm for Capital Protection is Proposed in the new Bond Ecosystem:

The proposed Bond Ecosystem provides a proprietary algorithm, conceived for capital protection as well as the provision of true safe returns. Capital as well as returns are preserved in the proposed BondCoin Ecosystem much better than the present system.

Minimal Electronic Trading – Present Bond System: 

In the present Bond system, only 10 to 15% of Municipal bonds and 65% of US Treasuries are traded electronically, according to SIFMA. With household and non-profit investors constituting 40.4% of the Municipal Bond market, this is a burning issue that needs to be addressed holistically. The rest of the world is far behind in electronic trading of bonds. In the European Commission’s “Report from the Commission to the European Parliament and the Council” dated July 28, 2023, this problem of lack of electronic trading and transparency has been recognized. 

A Separate Exchange, an App and Simplicity of Trading: 

Measures taken toward solving this problem are as follows:

1. A separate Exchange is planned in the proposed Bond Ecosystem with adequate compliance measures.  
2. Wider access is planned with web as well as Mobile access with a simplified App.
3. Simplicity of trading will increase market width and depth. 

Both the separate Exchange as well as the App form part of the proposed investment.

Volatility in the Present Bond System: 

Volatility in Bonds had investors suffer some of the largest losses in 250 years, as the Federal Reserve raised target interest rates 11 times in 2022-23, from 0.25%-0.50; to 5.25%-5.50%. Nearly one third of US pension fund assets are invested in Fixed Income markets, according to SIFMA. Pension fund bailouts were announced in 2021, 2022, 2023 and in 2024. Volatility in Bond markets causes losses in Bond portfolios, going against its grain of a true “safe haven”. 

AI Decision-Making Process Minimizes Cyclical Volatility: 

The proposed Bond Ecosystem provides a framework for AI Decision-making, assisted by an algorithm, for protection against rate fluctuations and volatility during a recession & all economic cycles, aiming to provide true safe haven assets in both products but especially in its Product - 2 - Investment Grade category, (BC-Ella).

Real Yields, devoured by Inflation, remain Extremely Low:

Inflation devours the frugal nominal gains on bonds in the existing system. Real yields are extremely low at an average of 0.34% for the past 10 years, on the indicative 10-year US Treasury! Inflation protection bonds exist, but do not afford adequate protection to investors.

“BC Inflation Shield” (BCIS), offers a solution:

The new Bond Ecosystem I have proposed product-4, called “BC Inflation Shield” (BCIS), that offers considerable protection against the problem of inflation. Issue costs of “BCIS”, to issuers are only 3.83% which could be reduced to 0.24% at their option. In order to test and prove the efficacy of the Algorithm proposed, a simulation of calculations based on actual data in the USA, from Jan. 1, 2012 to Jan. 1, 2022, for ten years, has been calculated by me in the Masterplan. Investments in BCIS held from 2012 to 2022 would have actually earned the retail consumer a return of 5.04% which is much better than the present system. This return, indicated a positive yield of 2.86% net of inflation. The Algorithm is flexible to those issuers who wish to increase this return.