Note and Chart by Bespoke Investment Group
With QE2 on the way, there are a contingent of investors who believe that even with interest rates near record low levels, long-term US Treasuries are a can't lose proposition. The argument goes that if the economy is weak, Treasuries will rally, and if the economy stabilizes or picks up, purchases by the Fed will support prices. While the argument sounds good in theory, those buying Treasuries based on this logic have been losing. The chart below shows the performance of US long-term Treasuries over the last six months. Since their peak in August, they have declined over 5%, and just in the last two days they've broken below levels that had been acting as short-term support.
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