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In US We Trust: Bond Bulls Argue Case for Buying Treasurys

By    |   Friday, 15 Apr 2011 11:55 AM

The popular trade now is to short Treasurys as a play on the exploding government debt burden. For example, Bill Gross, manager of Pimco Total Return, the world’s biggest bond fund, has adopted a negative Treasurys position in the fund.

But Mitch Tuchman, CEO of investment advisory firm MarketRiders, believes that’s a wrong-headed approach.

“It has always been a bad idea to bet against America and our ability to prosper even against overwhelming difficulties,” he writes in U.S. News & World Report.

“America will cut back its spending, innovate, and pay off its debts. We will earn our way out. … Selling Treasurys is a bet against our ingenuity, work ethic, and our breed of capitalism.”

Treasurys may not provide the returns that stocks do, but they offer safety. “Treasurys protect you against catastrophic events in the world,” Tuchman says.

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Bill Gross (Pimco photo)
“They are your ‘go-to-sleep-at-night’ funds. … If you listen to Bill Gross and sell your Treasurys, you'll regret it the next time the sky starts falling.”

Tuchman’s recommended vehicle to buy Treasurys: Vanguard's Total Bond Fund ETF (Ticker: BND).

Goldman Sachs says Treasury bears are overdoing it too.

“Many market participants are worried that the end of the (Federal Reserve) Treasury purchases will have strongly adverse effects on bond yields,” Sven Jari Stehn, a Goldman economist, writes in a report obtained by Bloomberg. “This is unlikely.”

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The popular trade now is to short Treasurys as a play on the exploding government debt burden. For example, Bill Gross, manager of Pimco Total Return, the world s biggest bond fund, has adopted a negative Treasurys position in the fund. But Mitch Tuchman, CEO of investment...
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2011-55-15
Friday, 15 Apr 2011 11:55 AM
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