Insights & News

January 2012
Investment Outlook

The Risk of Safety



Safety has rarely been more expensive—or more dangerous.  Curtis Gross, FAI’s Director of Research, is interviewed by the Wall Street Journal.

For the past five years, the Federal Reserve has pushed down the interest rates on traditionally safe assets such as Treasury bonds to near record lows, in hopes of sparking the economy. Today’s 10-year Treasury rate of about 1.95% is about half its level in January 2008.

Rock-bottom rates hurt retirees investing for income—and create a dilemma for the millions of savers who rely on bonds to steady their stock portfolios. Bond prices move in the opposite direction of yields, so when prices fall, yields climb. With prices near record highs, even a small move can produce losses for investors.

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