This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Treasury Bonds: New Lows, Now What?

NEW YORK ( Fabian Capital Management) -- The volatility in interest rates this year has been particularly troublesome for fixed-income investors.

Much of the jump in long-term Treasury bond yields has been due to the expectation of the Federal Reserve tapering its asset purchase programs in 2013. The unrelenting rise in stock prices combined with investors pouring assets into equity-oriented funds at a breakneck pace has also put downward pressure on the fixed-income sector. The recent municipal bankruptcy headlines in Detroit certainly haven't helped matters either.

These factors have combined to create a panic situation in Treasury bond prices that has sent long-duration ETFs such as the iShares 20+ Year Treasury Bond ETF (TLT) to new lows last week. TLT is currently down over 14% from its May 2013 high and appears to be headed lower.

The fundamental and technical picture for long-term Treasury bonds is certainly weak. Right now the price of TLT is in a persistent downtrend with no hint of stabilization on the horizon despite the Fed's recent reassurance that it will continue its indefinite $85 billion per month bond-buying program. Investors are signaling that the long-term fear of inflation and appetite for risk are trumping the safety of Treasury bonds at this juncture.

Even Pimco's Chief Executive Officer Mohamed El-Erian is recommending that you keep your bond exposure in the short to intermediate-term duration in order to lighten the interest rate risk in your portfolio. He also stated that he feels bonds represent a better value than stocks right here, and I tend to agree with him.

Despite the fact that stocks can remain at these levels for an indefinite period of time, I don't believe that making new allocations to equities at these highs makes a lot of sense.

I still feel that moving forward we are going to see continued volatility in fixed-income for the remainder of 2013. That includes strong price moves, both up and down, in response to changing conditions. One uncertainty that the bond market will be paying close attention to is the selection of the next Federal Reserve chairman. Ben Bernanke's term will expire in January 2014 and thus we can expect a new candidate for the post to be narrowed down in the coming months.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $130.28 -1.14%
FB $79.19 -1.19%
GOOG $532.11 -1.42%
TSLA $250.80 -0.26%
YHOO $42.94 -0.31%

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs