Courtesy of Doug Short
Since the inception of the 2nd round of quantitative easing, I’ve been updating my Treasury Yield Snapshot several times each week, and I’ve also made weekly updates to a longer-term view of the 10-year Note yield here (chart below).
My interest in Treasury yields has primarily been driven by a fascination with the rather dramatic impact of the Fed’s strategy on the economy. However, for a thoughtful perspective on fixed-income investing in the current environment, I highly recommend a post that appeared this weekend on Seeking Delta. Here is the opening paragraph.
| A few days ago, I was asked how I would position the fixed income portion of a portfolio. In order to provide an answer in a timely fashion I basically responded that due to the currently low interest rate environment, a steep yield curve predicting higher rates and corporate credits that would be sensitive to either an improving or weakening economy I would weight the portfolio toward short duration, government debt. Longer duration credits would only be favorable as a means to speculate on falling rates in the short-term or in an economic forecast that gives a high probability to decade with very low inflation. Under any other conditions, long-term bonds are not priced to deliver adequate real returns so a strategy of rolling short-duration bonds should outperform. More… |
Click the More link to read the full article, which is well illustrated with charts. There is also a PDF version which prints nicely for off-line study.
Hat tip to Seeking Delta for a thoughtful analysis on tough topic in these strange economic times!
