Treasury bond sell-off is now a buying opportunity

Investors over-shoot by over-reading Fed's tea leaves.
APR 22, 2013
All those investors rushing to get out of Treasury bonds before the Fed starts hiking interest rates might want to slow down and take a breather. With the yield on the 10-year Treasury up more than 50 basis points over the past 30 days and having hovered above 2.1% all week, some market watchers are saying the bonds have entered value territory. “At this point I think we've fully taken out the premiums and I think the market has over-sold a little bit,” said Jake Lowrey, a portfolio manager at ING U.S. Investment Management. The benchmark 10-year Treasury's yield rally kicked off at the start of the holiday-shortened week on Tuesday morning when most analysts expected international buyers to step in as the yield crested 2.2%. The yield did pull back a bit on Wednesday to around 2.12%, but by mid-day Friday it was back up to near 2.2%. The market is reacting to some mixed signals from recent comments from Fed Chairman Ben Bernanke that suggested the economy might be getting strong enough to support a tapering of the current quantitative easing policy that includes monthly purchases of $85 billion worth of Treasury bonds and agency mortgages. But even the most ardent Fed watchers aren't expecting any real tapering before at least next year. “People looking for a steep and protracted increase in rates will be disappointed, because if they go into cash they will have a hard time finding yield, and they may have a hard time finding a decent entry point back into bonds,” said Robert Tipp, chief investment strategist for fixed income at Prudential Inc. “I think it's a good point in the cycle right now to underweight cash, but not underweight bonds,” he added. “There's a risk we could have over-shot on the bond selloff, and I think we've gone above fair value at this point.”

Latest News

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.