Yields on 30-year Treasury bonds finally caught up with their shorter-term counterparts on Monday, in terms of setting a record low.
And a lot of mom and pop investors grumble about how that means their retirement funds are dwindling. But the gains in price – which move in the opposite direction of yields – have made for some more than decent returns.
Thirty-year yields have lagged in the rally because there’s a smaller pool of investors focused on the long-term maturities — namely liability-driven buyers like pension funds and insurance companies, said Chris Ahrens, head U.S. rates strategist at UBS.
“There’s been a reluctance to lock in really long-dated U.S. assets at historically low yields,” he said.
“As we move into ever lower levels and yields compress, people get forced to move that much further out into longer maturities just to see some incremental return.”
“It wouldn’t surprise me to see the trade continue and see a move into even lower yields,” Ahrens added.
However, that lag in the move down in yield hasn’t prevented the long bond from giving investors a better return this year.
Year-to-date, 10-year Treasurys have returned 5.4%, according to an index compiled by Bank of America Merrill Lynch.
30-year bonds have returned 8.8%, while 5-year notes are up 2.2%.
Over the last 12 months, 30-year bonds have jumped 42% — vastly outperforming shorter-dated maturities.
