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Rekenthaler Report

Long Bonds Are for Fools

The investment hope is to sell them to greater fools.


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Would you exchange $100,000 for a promise to receive $143,371 in April 2050? The question is rhetorical: Your answer is “No.” No matter how reputable the counterparty, 30 years is a very long time to wait, and a 43% cumulative gain is a meager return for your very large expenditure of patience.

Such is the deal presented by 30-year Treasury bonds, which yielded 1.18% at the time of writing. If one were required to hold such bonds until their maturity dates, the Treasury Department’s offer would be firmly rejected. Few, if any, would accept a nominal return of slightly more than 1% in exchange for accepting the risk that inflation would not be entirely dormant throughout the next 30 years.

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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.