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iShares 20+ Year Treasury Bond Message Board

  • billy_berew billy_berew Aug 2, 2013 12:20 AM Flag

    Buy more 30-yr treasuries

    No thanks. I'd rather have a roll of Charmin. With huge deficits and $70T off balance sheet liabilities, this issuer has no chance of repaying debt, except by printing money. Buying the anything more than 3-yr maturity is a fools game. People are waking up to the fact that the Fed can keep interest rates low, but it can't control the default risk premium, which is increasing every day.

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    • There is no default risk premium in rates (yet). That day may come, but it's many years away. Right now there's actually a misplaced inflation premium in long-term rates (due to the perception in the market that Bernanke's bond-buying will lead to inflation), but there's little evidence of inflation and it looks unlikely anytime soon. Much more likely is a decade of malaise and low interest rates due to the high debt overhang and consequent low growth in the economy (high debt levels, both public and private, suck money out of the economy). It's counter-intuitive, but look at Japan for the past 20 years to see what's in store for us, both with our economy and long-term interest rates.

      • 1 Reply to merenkov
      • We know the default risk will be priced in sometime within the next decade, when some government simply run out of money. The dive could happen tomorrow in anticipation of it. All it might take is another government to go belly up like Detroit just did. The candidates are there - Greece, Spain, Portugal, Japan, Chicago, California, etc. Further, what if one player decides to bail on treasuries, which could trigger a pile on by 100 algos out there. Do you really want to risk a 50% loss on your money simply to chase a 2-3% return?

        In my opinion, this will play out like 2000. Everybody had fears the stock market was overvalued, but they were too greedy to pull out. All it took was a few sellers at the top to trigger a massive downward slide. It didn't take much to convince people their fears were well-founded, and they ran like lemmings. This time, though, it's a stock and bond market sell-off that will be triggered, and once it's down, it will stay down because the fed has no dry powder.

        My advice - do what you know is right for the long-term. Don't try and get cute with the timing.

 
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