The 30 Year Yield Has Hit Its 2011 High

[MediumTex]

Down down down.

It's taking a lot of discipline not to double my position.

Seriously?

You are wanting to buy more LT treasuries at 4.20% yields?

That's pretty impressive.

I like them too, but I'm not tempted to buy more.

[edit: I am a little tempted.]

[moda0306]

Clive,

If you could, I'd love a graphical representation of who killed Kennedy, Tupac and Biggie.  If anyone can find it, you can.

[Lone Wolf]

Down down down.

It's taking a lot of discipline not to double my position.

if they were the same it would quell my interest in going all in on TLT.

Does anyone want to deliver the bullish case on long-term Treasuries?  As a counterweight in the PP, I get it.  But I don't see the investment appeal of lending money to the government for 30 years as a straight-up play with all the chips.  What makes them look like a screaming buy to you?

[MediumTex]

Down down down.

It's taking a lot of discipline not to double my position.

if they were the same it would quell my interest in going all in on TLT.

Does anyone want to deliver the bullish case on long-term Treasuries?  As a counterweight in the PP, I get it.  But I don't see the investment appeal of lending money to the government for 30 years as a straight-up play with all the chips.  What makes them look like a screaming buy to you?

1. Secular bull markets typically end in blow off tops.  LT treasuries have not seen such a blow off top yet.

2. Deflation is what normally happens when a credit-fueled asset bubble pops.  Very bullish for LT treasuries.

3. Europe is starting to look like a pile of poop, which means lots of money is going to be entering the treasury market in coming months and years

4. As long as people hate an asset class, that means it has plenty of room to move higher.

5. Japan shows us that a country's public balance sheet has NOTHING to do with interest rates on that nation's debt.

6. When is the last time a shoeshine boy recommended 30 year treasuries to you?  If it's been a while, we are probably not close to the top.

[moda0306]

I'll add this as well:

1) The mortgages that make up a decent portion of the retirement bond portfolios are going to be seen as excessively risky if homes continue to drop in value.

2) A huge retiring population (hopefully) looking at alternatives to fixed annuities for part of their portfolio.  Dividend growth stocks and long-term treasury bonds are two solid, diverse options that will be available to them.

I guess while I may not be looking to collect 4.2% interest for 30 years, that's how many others are going to see it... to me it's a leveraged bet on interest rates, to some degree.

Lastly, LW, for me personally, it is a bit of a "diversifier" to hold extra LTT's, because they act as a reasonably good form of "housing price falling" insurance (not perfect by any means), and the tax-adjusted rate of return is preferable to my mortgage rate if invested in a Roth.  I'm only 10% down on my home, so I feel it's important for me to hedge against home deflation without 1) losing to my 5% mortgage, and 2) keeping it liquid until the possible further deflation.  If rates drop to where my LTT's are no longer beating my mortgage, I have a decision to make... as that rate spread gets further and further... the decision becomes easier.  At some point I'll get sick of it and sell my LTT's, liquidate part of my Roth, and pay down my mortgage and/or refinance.

If rates rise and my LTT's fall in value... given my faith in the PP, I'll assume that inflation and/or some prosperity is coming back, and I'll take the combination of those as a hopefull sign that my house will at least hold its value.

[AdamA]

Does anyone want to deliver the bullish case on long-term Treasuries?  As a counterweight in the PP, I get it.  But I don't see the investment appeal of lending money to the government for 30 years as a straight-up play with all the chips.  What makes them look like a screaming buy to you?

Because no one likes them.

I realize that, on its own, this is not the best of arguments--there are, afterall, plenty of bad investments that no one likes, with good reason.

The thing is, I don't buy the bear argument for 30 year treasuries at all.  I don't care how bad the debt is, or how much QE we engage in, right now there is simply nothing else safer. 

Almost everyone I talk to about 30 year treasuries tells me that I'd be better off to at least move down the yield curve to ten year bonds.  There is so much group think surrounding 30 years (almost universal agreement that the are lousy) that I just have to believe that there is still a lot of upside. 

The bearish sentiment on them is way out of proportion to the bearish reality. 

[MediumTex]

The 30 year bond is yielding 4.58% right now.  I believe this is the highest it has been since the beginning of the year (give or take a few basis points) and I predict that it will go no higher in 2011 and that it will probably fall substantially.

My reasons for this prediction are many and each one has a pretty involved explanation, but I see many catalysts for yields to drop substantially.

No change to my PP, of course, but right now the 30 year bond looks like an amazing opportunity.

I wanted to follow up on this prediction from last January now that we know what happened.

It turned out pretty to be a pretty good call.

[dualstow]

I wanted to follow up on this prediction from last January now that we know what happened.

It turned out pretty to be a pretty good call.

My favorite part:

3. Europe is starting to look like a pile of poop,