The Case for Buying Treasuries

Jeffrey Gundlach, manager of DoubleLine Total Return, believes interest rates could stay low for years to come, making government bonds a safe bet.

Most bond investors today are preoccupied by the issue of when interest rates will rise and by how much. Jeffrey Gundlach says those investors are looking at it all wrong. "The question isn't, 'What am I going to do with my investments today because I'm worried that the Fed is going to stop this policy of low interest rates?'" says Gundlach, who manages DoubleLine Total Return Bond Fund (symbol DLTNX), a member of the Kiplinger 25. "The question is, 'What should I do with my investments today, understanding that the Fed is not going to stop this policy?'"

Gundlach says that if investors read between the lines of published minutes from Federal Reserve meetings, they'll see that the Fed has essentially declared that it sees no risks to current low-rate policies and intends to continue with these policies for the foreseeable future. The central bank is currently holding down interest rates in two ways: by keeping short-term interest rates near zero through its targeting of the federal funds rate (the rate at which banks lend money to one another overnight) and by buying $85 billion in long-term Treasuries and mortgage-backed bonds each month. The yield on the benchmark ten-year Treasury hit an all-time closing low of 1.40% in July 2012 and stood at 1.93% as of March 22.

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Elizabeth Leary
Contributing Editor, Kiplinger's Personal Finance
Elizabeth Leary (née Ody) first joined Kiplinger in 2006 as a reporter, and has held various positions on staff and as a contributor in the years since. Her writing has also appeared in Barron's, BloombergBusinessweek, The Washington Post and other outlets.