Friday, July 10, 2009

"Safe" investing in U.S. Treasurys?

When risk assets all over the world collapsed in price in 2008, many took refuge in U.S. Treasury instruments. As a result the 2008 return for the index representing various maturies of U.S. Treasurys was 13.7%. The 2008 return on the Treasury bonds with 30-year maturities was an eye-popping 41.3%.

2009 is a different story. Investors have found that investing in Treasury instruments can have a downside also as interest rates have increased and driven prices down. For the 6 months ended June 30,2009 the weighted index of all U.S. Treasury securities has gone down 4.3%. Even more dramatically, the YTD 2009 return on 30-year maturity Treasurys is a negative 20.3%.

So much for the safety of U.S. Treasurys!