In fact, the great bull market in bonds has persisted during most of the last four decades, Kass said.
“Over the last half century, bonds have historically been considered a risk-free asset class,” he wrote. “Nevertheless, I believe bonds should now be seen as a return-free asset class that is very risky, and long-dated fixed income should require a warning label for all potential buyers.”
Kass cited five reasons to short Treasuries:
- The flight to safety will likely have a diminishing half-life.
- Flows out of stock funds and into bond funds seem to be at a tipping point.
- Confidence is recovering as economic growth reemerges and risk markets improve.
- Inflation remains an issue.
- The failure to address our fiscal imbalances could come back and bite the bond market.
PIMCO Total Return ETF (NYSEArca: TRXT) manager Bill Gross also tweeted a warning on Treasuries. He said if investors want to own long Treasuries, buy them in TIPS form – Treasury Inflation Protected Securities. Gross on Tuesday said 2-3% inflation is “a minimum in future years.”
iShares Barclays 20+ Year Treasury
