Salient to Investors;
Bond bears are buying Treasuries despite less-than-inflation yields that are the least in three years. Even bears who aren’t buying don’t expect 10-yr note yields rising much above 2 percent.
Donald Ellenberger at Federated Investors said Treasuries offer little real value, but for the short-term, it is just hard to be a bear as the fiscal cliff is a big deal, and the Fed is determined to keep rates low. Ellenberger said it’s much more difficult trying to analyze politicians than the economy.
Economists expect the 10-year Treasury yield to rise to 2.1 percent by the end of September 2013 versus the average of 6.49 percent during the past 50 years.
Jeffrey Schoenfeld at Brown Brothers Harriman prefers Treasuries to US corporates, and said Treasury yields are ignoring the progress made on the economic front Schoenfeld said the Fed will succeed at holding the 10-year yield below the growth rate of nominal GDP, which it tracks during conventional economic expansions.
Investors have bid a record $3.16 for each dollar of Treasuries sold at auction in 2012 versus $3.04 in 2011. The Bank of America Merrill Lynch MOVE volatility index dropped to the lowest since its record low in May 2007.
Steven Huber at T. Rowe Price is buying Treasuries and said their fundamentals should point to higher yields, but the fiscal cliff and the Fed on hold is keeping yields down.
Bill Gross at Pimco raised the fund proportion of US government and Treasury debt to 24 percent in October from 20 percent in September. Gross said the cap on the future pace of growth was probably lower than the Fed’s forecast.
Morningstar said US bond funds attracted $4 billion through October versus $17.3 billion for multi-sector funds, $48 billion for municipal debt, and $126.2 billion for corporate securities.
Thomas Atteberry at First Pacific Advisors said the margin of safety is gone from Treasuries, which don’t have a fundamental value.
Scott Minerd at Guggenheim Partners said any rise in rates will be modest due to Fed action – the yield on the 10-year note would be as much as 2 percent higher without Fed buying.
Yoshiyuki Suzuki at Fukoku Mutual Life Insurance said US Treasuries are the safe place to invest.