SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

Time to Dump Treasurys?

Just how low can Treasurys go? As the Dow Jones Industrial Average was falling more than 400 points today, the yields on Treasurys plunged to a new all-time low, falling below the 2.0% mark for the first time. For many advisers and investors, the drop served as another wake-up call that it may be time to ditch the government bonds.

Getty Images

Bill Gross, the fund manager of the world’s largest bond fund at Pimco, has long been bearish on Treasurys, but also said recently that a recession is likely. (Which would actually be good news for Treasury bonds.) And in the past few months several advisers and bond fund managers have also moved out of the government bonds, which pay low yields and are most susceptible to losses from rising interest rates, analysts say. That’s what pushed Russell Francis, a financial adviser in Beaverton, Ore., to move his clients largely out of Treasurys a month ago. “The yields are so low right now that they pretty much have nowhere to go but up over the next six months to a year,” says Francis.

Despite their low yields, investors continue to flock to Treasurys for their liquidity and low credit risk. The bonds rallied Thursday as fears of a global economic slowdown peaked, pushing yields to their new low. (Bond yields fall when rates rise and vice versa). But critics say the rally can’t be sustained and worry the bonds, especially those with longer maturities, are likely to lose money if interest rates rise. Their low yields mean investors have little cushion to protect themselves from such losses.

“Owning Treasurys right now just means you’re not getting much of a return and it means you’re taking on a lot of interest rate risk,” says David Morgan, a principal with JMG Financial Group, a financial advisory firm based in Oak Brook, Ill., who recommends his clients hold Treasury Inflation-Protected Securities to guard against inflation, but doesn’t allocate money specifically to pure Treasurys. Francis is instead creating bond ladders with municipal bonds, Build America Bonds and investment grade corporate bonds. He says holding individual bonds instead of investing through a mutual fund protects his retiree and pre-retiree clients from price movements due to interest rate changes. By holding their bonds to maturity they can be sure to get their principal returned in full. The yield advantage they have over Treasurys could also offset losses due to rising rates, he says.

For more:


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 8)

View all Comments »
    • By WebOsPublisher

      Free Icon Editor. Download Free Icon Maker – easy icon creation software
      Free Icon Maker
      Web icons
      User icons
      Business icons
      Toolbar icons
      Database icons
      Computer icons
      Office icons
      Download icons
      It’s a simple, easy to use free utility for editing Windows icons.
      Free Icon Maker
      Junior Icon Editor will help you to
      Create and edit icons in color depths up to 16 million colors
      Create and edit icons for Windows XP, Vista, 7, 8 in 32-bit color depth with 8-bit alpha channel
      Edit .png icons for web, Linux, Android, iOS, WP7
      Paint images with pen, brush, airbrush, ellipse, rectangle, line, curve tools
      Roll, shift and rotate images
      Import and export .ico, .png, .xpm, .xbm, and .icpr formats
      Sort images inside icons
      Copy and paste images to other applications
      Copy and paste color values from the clipboard
      System requirements: Windows PC.
      Download free icon maker (5.7 MB)
      Why do you need royalty-free icons?
      There can be a significant impact on your website of using royalty-free icons, ico 16×16 and larger 256×256 icons for older versions of Windows, so wouldn’t you like to know how can get these icons, business icon set and other graphic images for web usage from online establishments?
      If you are designing a business related website or are creating an application for business purposes such as accounting and finance, you will need a business icon set. Fortunately, there are several online establishments that offer royalty-free icons in a variety of choices. For instance, you could choose the format from BMP, PNG, ICO or GIF while you also get a choice as far as the sizes are concerned, you can pick small ico16x16 or the larger 256×256 icons.
      You will find that if you need sets of icons for a specific category; these sites will be your ideal choice because they offer graphics at really cheap rates. Yet, you cannot point a finger at the quality of the images; they are impressive looking and professionally designed. You will also find images in the icon set for other business related issues such as charts, graphs, staff, office, group, scales, paper weights, briefcases, conferences, etc.
      All of these icons, business icons, large 256×256 icons and the smaller ico 16×16 images are designed for use in any professional application. Whether you are designing a website, a graphical user interface or a web based interface; these royalty-free icon images can come in very handy. While you can buy most f these images in icon packages, you ca also choose singular images; both options are available at affordable prices, making this ready icons the best choice for you.
      Colour Your Own Screens Considering the Brand New Microsoft Windows Designs
      Screens play a prominent part in increasing the functionality plus look and feel. Proceed a pace more deeply with the help of up to date icons available here and make your applications entertaining to utilize and uncomplicated to navigate, by using assistance from a couple of wisely produced visuals to use by means of this website.
      A specific MR. Fred R Barnard inside a diary in 1921 stated a number of phrases, Уa picture is worth a thousand wordsФ, perhaps he could n’t have recognized the particular importance of the key phrases after that, or maybe he did, as way more than 90 years immediately after making this specific announcement we try to find an increasing number of solutions to use it. Barnard could have said it when touching on the exact potential of graphic commercials, however a couple of decadeТs back this found their way into the world of computer programming together with the coming of Graphic screens the moment artwork and symbols exchanged composing complicated command-line justifications.
      Employing very simple, easy to understand designs could go far straight into making the life of an person less complicated. Through getting these types of symbols not only do you help to make it less difficult for you to find their way, it really makes all the interface more pleasing.
      You may get the hands on more than seven-hundred these types of symbols over here, all of them at a cost of ninety nine us dollars. The style is available at a size corresponding to a sq . of 48 pixels that have a see-through background and a pic of twenty six by 26 pixels in the center. a majority of these images compatible with all your MS Windows 8 plus MS Windows phone apps come in the PNG file format and come in any of 14 different colorings between the usual blue, red as well as green to the more distinctive deep blue along with light-red, and may even be taken without or with the encompassing circles.
      Customize each and every page on your pc with the aid of these professionally designed designs plus go ahead and take drive utilisation to a totally new level; it is possible to replace icons for any normal functions like redo, undo, back, refresh etc. along with all of these aesthetically desirable images. Along with the usual kinds, you get to choose through a whole lot off distinctly intended images that youТll have some fun determining features to, you’ve got a cardiologist image, the motor man symbol, a private eye image, an auditor symbol and probably the best angel image.
      These types of icons, as I have already stated, are available in an entirely deployable kind, you will get your hands on them once you make the deposit and you then have the freedom make use of all of them in each of the possible methods. A captivating interface can make hours at work seem to be way easier along with helps you save through becoming tired at your inner levels by prying those intensive series of instructions. Easy routing, desirable user interface in addition to good operation lie at the heart of each application, with the aid of this specific pack you have the interface along with the routing part dealt with, the only issue that is definitely preventing you against creating a cutting edge app is you. Acquire a majority of these designs now and then revitalise the whole encoding experience.
      Icon Creator | Icon Software | Downloads | Buy Icons | Info | Support
      Copyright © 2010-2012 Graphics 4 Design. All rights reserved.
      Perfect Toolbar Icons
      Business Toolbar Icons
      Database Toolbar Icons
      Large Weather Icons represent a number of weather conditions typical in software, weather Web sites, and mobile gadgets. The icons are supplied in typical resolutions standard to Windows, Mac OS, and mobile devices. The largest versions are huge 512×512 pixel images with vector sources in Adobe Illustrator (.ai) format easily affordable and ready to be printed or used in presentations in highest resolution.
      View icon set
      Speed up creation of e-romance Web sites and applications using ready-made Delicious Love Icon Set. The pack contains more than sixty love icons and represents lots of symbols and objects common to Web sites dedicated to human relationships.
      View icon set
      Add beautifully designed toolbar icons to your recent projects. Program Toolbar Icons are readily available, royalty-free graphics of items, tasks and concepts that are typically used in software toolbars.
      View icon set
      SibCode Medical Icon Library is a fantastic set of images that covers most of the possible medicine-related application’s needs. The choice of professionals at an affordable price!
      View icon set
      Give your Web application, database or software an exclusive, attractive look with a stunning new set of icons. Plastic Toolbar Icons are carefully developed and hand-crafted in all the provided sizes.
      View icon set

    • Pete,

      What Mike was pointing out is that if you sell your bond before it matures and the current interest rate is higher than when the bond was issued, then you will take a loss because no one will buy it from you at the price you originally paid. If you held it to maturity, you could cash it in for your original purchase price, plus the original interest.

    • Mike -
      If rates rise it is irrelevent whether you hold an existing bond to maturity or sell it and buy a higher yielding one. Try the math; there is no differece in total return.

    • John Exter was A fed governer and work closely with the bullion banks when Nixon closed the gold window, from a 1991 Interview:

      EXTER The most important one is this flight to currency. It is bigger than anything I expected right now. We are still having troubles with banks, thrifts, insurance companies, & others, which will cause more people to move down to Treasury bills & currency. At some point they will go to gold. We’re at the threshold of that point. When they go to gold instead of currency or Treasury bills, the price of gold will take off. It will be a bandwagon everyone will want to get on. Then even those who have bought currency will see how foolish they were & that gold is far better to hold … than currency, that it is the best store of value money man has ever found. It’s stupid for people to hold currency. The Fed can simply print all they want at very low cost. Paper money is as abundant as leaves on trees.

    • Hey ktf… assuming there is no default holding a bond to maturity does assure the holder a return of their principal. I realize you are trying to be cute and bring up inflation, but that is an entirely different argument and deals with a risk in a loss of buying power. The article was clearly pointing out that in a “bond fund” where bonds are constantly bought and sold there is significant risk of loss of principal (yes actual principal without getting cute about inflation). That risk is not there when holding individual bonds to maturity (other than default of course).

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at