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U.S. Treasury in 2012
Old 01-19-2012, 08:59 PM   #1
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U.S. Treasury in 2012

If I understood correctly this article https://personal.vanguard.com/us/ins...es-2011-012012 Vanguard is recommending to stay neutral on Treasuries. However, I heard interview with Bill Gross and he is bullish on Treasuries.
Last year there were the same predictions that Treasuries will be down but I did continue to invest in Long and Intermediate treasuries and got very good return. This year I have mixed feeling
I stopped buying Treasuries, but I'm not sure if I should sell them and move money to some funds that have more corporate exposure.
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Old 01-20-2012, 08:52 AM   #2
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Treasuries may be a defensive play and could continue to remain reasonably solid over the next couple of years. Then again, something could cause rates to rise up and Treasuries will falter.

The important thing to remember if you enter this space is that most of the low-hanging fruit has been picked. Since about 1984 we have been in a roaring bull market for bonds as (with a few short pauses) bond yields have steadily declined from low double digits (even for investment grade) to 3-4% today (or less for shorter duration Treasuries). It's hard for me to imagine yields can get much lower, but then, I would have said the same thing 5 years ago when bond yields were already quite low relative to history.

I don't know, therefore I diversify my holdings.
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Old 01-20-2012, 09:01 AM   #3
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I don't know, Bill Gross was wrong last year. I'm staying the course with my AA and hoping for the best.
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Old 01-20-2012, 09:24 AM   #4
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If you are sticking to a reasonable AA, I think you should be fine. Anyone who is maintaining an AA will have sold a fair amount of bonds over the last year. If bonds plummet, you will have sold high and will get a chance to buy lower.

I would not choose this time to up your allocation of bonds though. I think they are pretty dangerous at these levels. They appear to be irrationally priced to me. If you have an extremely high allocation to bonds out of risk adversion, I might consider the possibillity that bonds could end up being just as risky as stocks going forward from here.

Disclosure- I continue to maintain my essentially 100% stocks asset allocation.
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