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The Riskiness of Bonds

Felix, this time I agree with you on about every point, especially regarding being cautious about buing investor-grade corporate bonds of more than four or five years maturities. Your inflation scenario resulting from massive monetary expansion is credible, but I have one caveat: the timing of the deflation/inflation switch. No one knows, of course, but my guess. for what's its worth, is that the inflationary cycle will begin at more likely than not at least two years or three years out. So, money in investment grade corporates of three to five years do not to me appear to be putting one's capital in these assets at much risk. (Please, however, don't ask me about my AIG bonds).

Which Is Safer: Investment Grade Corporate Debt or Government Bonds?

IEric hit the homerun ball in this article. Investment grade corporate bonds purchased from August through November 2008, with maturities of one to five years, especially those of double or tripple A banks and insurance companies in comparison with US treasuries of any maturity, looking back in retrospect at the end of December would have been the best play for conservative investors. The yield to maturity ranged between six and one-half to over nine percent. The ratings on these bonds with few exceptions have remained high investment grade and their values have risen considerably in last four to five weeks. When the masses run in fear to treasuries and ignore investment grade bonds, they will surely lose, especially when they invest in maturies longer than a few months and and hold. Though yields have fallen considerably during the past month, investment grade financial corporate bonof medium duration are still a sound investment for conservative investors who do not trade.