Risk-free return

The return on assets deemed to be safe, such as cash or government bonds. This concept is the basis for financial models in which investors demand a risk premium over the risk-free rate. However, such assets are not really risk-free, as investors can suffer real losses if the returns are below inflation and, in the case of government bonds, capital losses when yields rise. In the late 2010s, when government bonds in some countries traded on negative yields, some commentators quipped they offered “return-free risk”.