Credit guru David Goldman says buying 30-year U.S. Treasuries is a smart move now.
“From the standpoint of investors who need cash flows, certainly bonds are a major part of the portfolio,” Goldman told CNBC.
“The demographic tailwind behind the bond market is going to continue, and I point out that the spread between 30-year and 10-year paper in the Treasury market is at an all-time record, at about 115 basis points," he says.
“If you want to be in the bond market, be in for a pound, not just for a penny. Be in the 30-year market,” Goldman says. “I’m overweight in my own portfolio and I continue to be,” he says.
"In the world of the bankrupt, the half-bankrupt is king."
High-grade corporate bonds now offering remarkable low yields are another story, says Goldman.
He notes that a “global flood plain of savings” coming from the global Asian population, Fed actions and the fact that the securitized market has ceased to exist, has led prices of corporate bonds to trade “at stupid levels.”
“I think that very solid corporates with highly predictable cash flows are OK, but all of this has already been priced in from a performance standpoint,” Goldman says. “I wouldn’t touch IBM at 1 percent.”
“I wouldn’t touch mortgage-backed securities because buying mortgages is effectively a bet that the Fed will be in that market forever.”
According to The Wall Street Journal, 30-year Treasury bonds have a much narrower investor base than other maturities because buyers are mainly domestic instead of foreign, and are typically pension funds, insurance companies and asset managers that need to match long-dated liabilities.
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