This past week the Fed announced that foreigners sold $74 billion in U.S. Treasury bonds. In my book, Surviving the Storm, McGraw-Hill 2007, I wrote on pager 232 about what could happen if China and Japan became sellers of U.S. Treasuries, and it is not good news for bond holders.
With interest rates near 0%, bond prices, which move inversely, are now at all time highs. Mathematically, the bond returns of the last 3, 5 and 10 years cannot be duplicated. However, it is possible for interest rates to go up, and bond prices go down. Perhaps significantly if bond holders the size of China and Japan enter sell orders.
It is possible that bonds are not as principal safe as they appear. If you own long bonds or bond funds, now would be a good time to create an exit strategy!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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