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Low Yields Don't Make a Bond Bubble


Courtesy of Thomson/Reuters

I am not saying that this trade will work today. The yield on the 10-Year U.S. Treasury is trading around 1.50% and my semiannual risky level is at 1.389%. Instead, I recommend booking profits on U.S. Treasuries and shifting to cash as your safety strategy.

In my opinion investors are currently flocking into the U.S. 10-Year note at 1.50% because they are worried that U.S. stocks could crumble as they did between October 2007 and March 2009. The S&P 500 declined by more than 50% to a March 9, 2009 low.

Keep in mind that Federal Reserve policy is encouraging a lower 10-Year yield and that the Fed may cause the U.S. economy to turn Japanese. On Tuesday, the Japanese 10-Year yield closed at 0.77%.

At the time of publication, the author had no positions in any of the investments mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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