If You Own U.S. Bonds, This May Be the Perfect Time to Pause and Reflect
From Profit Confidential January 18, 2013 - 12:13pm
The year 2012 wasn’t a bad year for the stock market, thanks to the Federal Reserve keeping interest rates near zero and the Fed increasing the money supply to a record level. But for bonds, it was a breakeven year, as U.S. bonds closed out 2012 at about the same level they started the year.
The Federal Reserve has been keeping interest rates artificially low since the financial crisis struck the U.S. economy and investors in U.S. bonds faced falling yields and the price of bonds rose. (Bond prices go up when interest rates go down and vice-versa). Real returns on bonds are actually negative when one considers inflation.
Here’s a chart of the 30-year U.S. Treasury:
Chart courtesy of www.StockCharts.com
At the beginning of 2011, the yield on 30-year U.S. bonds went as high as 4.8 %. Now the same bonds yield is just a little above 3.0%. The 30-year U.S. bonds fell to as low as 2.4% in...