“And rates would not have to go through the roof to take out billions in principal for investors, most of whom are in bonds because they are nearing retirement,” the NY Post reported.
“It’s my worst nightmare,” said a bond fund manager in the article. “There’s nothing I can do — the checks come in [from clients]every day, and I have to invest it.”
‘Hard to be a bear’
Yet some managers who were previously bearish on Treasuries are now buying.
“The combination of Federal Reserve efforts to stimulate the economy by buying bonds and the potential slowdown should politicians fail to avert the so-called fiscal cliff of tax increases and spending cuts has made Treasuries the debt that money managers have to own,” Bloomberg News reports.
“Treasuries offer little real value, but in the short term, it is just hard to be a bear,” said Donald Ellenberger, a manager at Federal Investors.
Indeed, some investors are using Treasuries as a safe haven to ride out the fiscal cliff or another potential deflationary bout.
Bianco predicts that yields are going to stay low for an extended period despite the fact most economists think that rates will be rising, Yahoo Finance reports.
“They haven’t for many years, and I don’t think they’re going to for many years,” since Fed bond purchases will keep yields low, he said.
“Stop going for yield, because we’re in a world where there is no yield,” Bianco added in the story. “I’m going to stick with the lower-yield, safer instruments. I’m not going to reach out for high yield or emerging markets where I think that those markets are starting to get a little bit frothy.”
ProShares Short 20+ Year Treasury (NYSEArca: TBF)