The 30-year trend of lower interest rates and inflation has also helped bolster bond investments.
Larkin in the report also warns that the Fed’s decision to hold interest rates down will eventually reverse. Furthermore, inflation risks will also end bonds’ attractiveness. [Treasury ETFs Stumble Into 2012]
With bonds outperforming stocks over a 30-year period, “the first thing it tells you is you’re probably at the most expensive bond market in our lifetime,” Larkin said.
I’m in the camp that Treasury yields will rise in 2012. With bond funds and ETFs seeing such big inflows last year, it makes me wonder how many investors are truly prepared for rising rates. [5 ETF Trends to Watch in 2012]
iShares Barclays Aggregate Bond
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Max Chen contributed to this article.