By m.mphoto @ Shutterstock.com
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
Latest posts by Jeremy Jones, CFA (see all)
- The Four Stocks Propping up Global Equity Markets - October 16, 2018
- Robinhood Markets? No Such Thing as a Free Lunch - October 16, 2018
- Higher Rates Help Banks - October 15, 2018