Low yields and concerns about rising interest rates have some investors avoiding US Treasuries. But should they count them out altogether? Russ Koesterich and Matt Tucker discuss their views on the role Treasuries should play in today’s investment environment.
So you should buy a lousy long-term return – 1.7% – because you have confidence that the Fed won’t lift rates in the medium term and cause you to take a capital loss? i.e. do something you’ll probably regret in the long-term because you won’t have to start regretting it in the short-term? Why buy long-term fixed rate instruments at all? As an investor (not a short-term trader), where’s the upside?
Matt Tucker: I think the point we’re trying to make here is that there’s a difference between US Treasuries (UST) as a tactical investment and UST as a strategic investment. We would not endorse UST 10 year notes as an attractive investment at 1.7% yield – in fact, Russ is currently advocating an underweight to Treasuries given the low yield and asymmetry of risk going forward. However, underweight does not mean a 0% allocation. UST have and still do provide an important balance against riskier asset classes both inside and outside of fixed income.
Pingback: 3 Bond Strategies for 2013
Pingback: 5 Investment Ideas for a Post-Fiscal Cliff Deal World | Advisor Perspectives