Fear has been dictating many market decisions, and as investors run for the shelter of Treasury bonds and related exchange traded funds (ETFs), they may regret letting emotion into the equation.

The recent financial plan to get credit and lending flowing among the markets may eventually accelerate a stock market rally or recovery, reports David Hoffman for InvestmentNews.

Ultimately, this could bear down upon Treasuries. The yields are so low that investors are already taking a cut in rewards. Yield on the three-month Treasury was at 0.03% on Sept. 17: the lowest it has been since 1954. While it had climbed to 0.94% last Tuesday, it is still close to rock bottom.

While investors will get their money back, the purchasing power of those dollars will have been eroded. One advisor feels that the only way going to treasuries will prove to have been a smart move is if we enter into a deep global recession. He’s warning clients that treasuries are currently overpriced.

  • iShares Lehman TIPS Bond Fund (TIP), down 3.3% year-to-date (black line)
  • iShares Lehman 1-3 Year Treasury Bond (SHY), up 4.5% year-to-date (green line)

Treasury Bond Exchange Traded Funds (ETFs)

For full disclosure, some of Tom Lydon’s clients own shares of TIP.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.