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Thirty-year Treasuries yield 3.11% today. Ten-year Treasuries yield 2.97%. You get an extra 0.13% in income each year for lending the government money for an additional 30 years. Sounds like a raw deal.
Not according to some institutional investors as reported here by the FT.
The 30-year or “long bond”, currently yielding 3.10 per cent, is attractive for so-called buy and hold investors such as pension funds and insurers who need to offset lengthy liabilities over the coming decades. A steady rise in yields from below 2.70 per cent in December has been accompanied by stronger demand at recent 30-year bond auctions. “Demand has been healthy,” said George Goncalves, a strategist at Nomura….
“I don’t think there is a view inflation is going to run away at this point. If you are a pension fund then looking at the 30-year at these levels seems attractive,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
With a 13 basis point yield premium, there is no investment case to be made for putting the long bond in an individual investor’s portfolio today.
Jeremy Jones, CFA
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