The Sage of Bay Street

Is the Long Bond Cracking?

The demise of an investment in Treasury bonds has been a theme repeated for a number of years now. Perhaps it's finally true. I analyzed the returns on five year treasury bonds for the last thirty five years. The assumption was that the individual investor purchased the five year "on the run" Treasury bond and sold it at the end of the year crystallizing the capital gain or loss and repurchasing the five year bond for the next year. In this way, the investor always held a five year bond. I believe that the bond return slightly outperformed the returns on the Dow Jones Industrial Average over the corresponding period. If this is incorrect, comments appreciated. If this is correct, perhaps a review of the longer term outlook is warranted.