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Hussman on the Risk/Reward Trade-Off for 30-Year Treasuries

John Hussman looks at the interest-rate risks inherent in buying long-term government debt.

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Ryan Leggio: Jeff Gundlach, the president of DoubleLine Funds and the manager of DoubleLine Total Return, he is the former manager of TCW Total Return, gave a keynote address at the Morningstar Investment Conference last week in which he recommended investors' purchase a long term treasuries. Specifically, because of the deflationary concerns out there, because of the relatively steep yield curve, and his recommendation was, long-term treasuries are the place to be, but if investor confidence in the United States government wanes to get out very, very quickly.

And the reason why he had to qualify his remarks and say to get out quickly was because of the math of long-term treasuries. As you and I both noted, the long term 30-year Treasury is about 4% annualized right now. The problem with that is the duration of 30-year Treasury Bond is, approximately 15 years.

Ryan Leggio has a position in the following securities mentioned above: HSTRX. Find out about Morningstar’s editorial policies.