Q:  With the recent news that one of the world’s highest-profile bond managers eliminated his fund’s exposure to U.S. Treasury bonds, should we be selling our Treasuries, too?  Do other types of bonds now offer better return opportunities?

A:  We are reluctant to advise anyone to change their investment portfolio based on the opinion of one expert or at the urging of the media.  Portfolio changes should be made in response to changes in one’s personal situation, not in response to the market or expert sentiment. Interestingly, despite being the only asset class to keep its head above water during the Global Financial Crisis, Treasury bonds are now the proverbial punching bag of the investment community. Concern over whether these safe instruments, too, will lose value as inflation rears its head and/or the dollar depreciates is widespread.  We should state clearly that short-term return is not the reason we favor Treasury bonds.  If all we wanted out of an investment was more return, we’d forgo Treasury bonds entirely and invest only in riskier asset classes (like stocks).  Bonds are a prudent choice simply because they provide safety and capital preservation in the worst of times; no bond provides that protection better than U.S. Treasuries.