Barron's U.S. Treasuries Bubble
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Date updated:01-03-2009

The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons -- and could provide competitive returns with stocks, even if the equity markets have a strong 2009.

symbol name last price % change open
  • +
  • TBT
    Proshares Trust
  • $46.76
  • 0.00%
  • $N/A

It is difficult for individuals to sell Treasuries short, but two exchange-traded funds, the Ultrashort Lehman 20+Year Treasury Proshares (TBT) and the smaller Ultrashort Lehman 7-10 Year Treasury Proshares (PST), offer a bearish bet on the Treasury market. Both these securities are designed to move at twice the inverse of the daily price movement in Treasury notes and bonds. Since the summer, the 20+Year Proshares has fallen almost 50% as Treasury prices have surged. If Treasury yields return to June levels, the ETF could double in price.

People owning TBT also tend to own: ABXANWARTIXCGMFXEMCEWZGLD

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  • +
  • PST
    Proshares Us Lehm
  • $50.89
  • 0.00%
  • $N/A

It is difficult for individuals to sell Treasuries short, but two exchange-traded funds, the Ultrashort Lehman 20+Year Treasury Proshares (TBT) and the smaller Ultrashort Lehman 7-10 Year Treasury Proshares (PST), offer a bearish bet on the Treasury market. Both these securities are designed to move at twice the inverse of the daily price movement in Treasury notes and bonds. Since the summer, the 20+Year Proshares has fallen almost 50% as Treasury prices have surged. If Treasury yields return to June levels, the ETF could double in price.

People owning PST also tend to own: DXDIBIIWMLEHOILQIDQQQQ

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  • +
  • TLT
    Ishares Barclays
  • $92.10
  • +0.13%
  • $91.87

Another alternative for T-bond bears is to sell short the iShares Barclays 20+Year Treasury Bond Fund (TLT), an ETF that gives exposure to the long-term government-bond market.

People owning TLT also tend to own: CVXPFEBTEIAUINTCIOOIVV

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  • +
  • BAC
    Bk Of America Cp
  • $14.48
  • -3.47%
  • $14.94

Long-term corporate bonds with investment-grade ratings of triple-B now yield an average of 8%, nearly 5.5 percentage points more than Treasuries of comparable maturity. They rarely have yielded more than four points above government debt. Preferred stock of financial companies such as Bank of America (BAC) and Morgan Stanley (MS) yields 9% or more, and many preferreds carry tax advantages because their dividends, like those on common shares, are subject to a 15% federal tax rather than rates on ordinary income.

People owning BAC also tend to own: AFLBABAXBENCMCSACSCODOW

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  • +
  • MS
    Morgan Stanley
  • $26.60
  • -2.42%
  • $27.06

Long-term corporate bonds with investment-grade ratings of triple-B now yield an average of 8%, nearly 5.5 percentage points more than Treasuries of comparable maturity. They rarely have yielded more than four points above government debt. Preferred stock of financial companies such as Bank of America (BAC) and Morgan Stanley (MS) yields 9% or more, and many preferreds carry tax advantages because their dividends, like those on common shares, are subject to a 15% federal tax rather than rates on ordinary income.

People owning MS also tend to own: AIGBACCCOPCVXFNMGE

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  • +
  • HYG
    Ishares Iboxx Hy
  • $84.58
  • 0.00%
  • $N/A

There are plenty of ways to play the junk sector, including ETFs like the iShares iBoxx $ High-Yield (HYG), open-end funds like Fidelity Capital and Income (FAGIX) and many closed-end funds, including some that trade at double-digit discounts to their net asset value.

People owning HYG also tend to own: FGXPMOMRKNVAXPWESIRI

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  • +
  • FAGIX
    Fidelity Capital
  • $8.49
  • -0.35%
  • $N/A

There are plenty of ways to play the junk sector, including ETFs like the iShares iBoxx $ High-Yield (HYG), open-end funds like Fidelity Capital and Income (FAGIX) and many closed-end funds, including some that trade at double-digit discounts to their net asset value.

People owning FAGIX also tend to own: BHSDGFDCINTCJHMNIMPX

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  • +
  • LSBRX
    Loomis Sayles Fds
  • $13.28
  • -0.38%
  • $N/A

The Loomis Sayles Bond fund (LSBRX), which owns a mix of U.S. and foreign government bonds, investment-grade corporates and junk debt, fell 22% last year. The fund, co-managed by bond veteran Dan Fuss, now has a current yield of around 11%.

People owning LSBRX also tend to own: AAPLAUYEMDEPDFDXIAFNDAQ

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