Are U.S. Treasury securities in a bear market?
*Barron's, by Andrew Bary, May 18, 2009:
THE BUBBLE HAS BURST.
"We're talking about U.S. Treasury securities, not housing. At the end
of 2008, risk-averse investors poured into Treasuries, driving down
yields to the lowest levels in decades. The 30-year Treasury bond
fetched less than 3%, and short-term T-bills carried yields of zero.
Since then, the economy has shown signs of bottoming, the credit
markets are functioning more normally, and the stock market has roared
back from its March lows. Treasuries now are in a bear market, while
bullish enthusiasm has taken hold in other parts of the credit market,
including corporate bonds, municipals and mortgage securities, all of
which had fallen from favor late last year. The 30-year Treasury, for
instance, has risen to a yield of 4.10% from 2.82% at the end of 2008,
cutting its price by 20%.
Barron's called a top in Treasuries and a bottom in the rest of the
bond market in an early 2009 cover story ('Get Out Now!' Jan. 5). We
weren't alone in recognizing some of the nutty year-end developments.
Warren Buffett highlighted the sale in late 2008 by his Berkshire
Hathaway of a Treasury bill for a negative yield. Buffett wrote in
Berkshire's annual letter in February that when 'the financial history
of this decade is written...the Treasury-bond bubble of late 2008' may
rank up there with the housing bubble of the early to middle part of
the decade. - How does the market look now? Treasuries still look
unappealing for several reasons. Yields are very low by historical
standards, the government is issuing huge amounts of debt to fund
record budget deficits, and the massive federal stimulus program
ultimately may lead to much higher inflation."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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