How Dangerous Are U.S. Treasury Notes and Bonds?
A lot has been written and said about how much money U.S. Treasury note and bond investors will lose when interest rates rise in the years to come, as they are expected but not guaranteed to do. However, I have yet to see or hear anything about the risk involved in waiting to exit a Treasuries position or speculating on Treasuries to increase in value in the short-term. On Friday (5/3/13), the yields for the 5-year note, the 10-year note, and the 30-year bond increased by 8.3, 12.1, and 13.8 basis points respectively. This was a very small taste of the risk involved....
...The above calculation indicates that 10-year Treasuries should currently be yielding 3.87%. This is about 2.13% higher than the 1.752% yield as of Friday’s close. A 10-year Treasury note is a commitment to lend money for 10 years. It does not only matter what an appropriate yield is for the next year. It also matters what an appropriate yield is for one to two, two to three, three to four… and nine to ten years from now....MUCH MOREHT: Abnormal Returns
