They are the few, the brave, the unloved, and among big investors, their number shrinks by the month. They are the last of the bond bulls, the investors who believe long-term US government bonds will extend a historic run that has already pushed interest rates to multi-decade lows.
Recent surveys show broad disdain for Treasuries among market cognoscenti. A cross-section of star money mangers and investors, including Warren Buffett, BlackRock's Larry Fink and even bond expert Dan Fuss of Loomis Sayles, have urged investors to switch to stocks, arguing yields have nowhere to go but up.
Yet the average retail investor keeps sending money to bond funds. And in the past few weeks, things have been moving in the bond bulls' favour.
Fear of a Greek exit from the euro zone and J. P Morgan Chase & Co's unexpected $2 billion trading loss have ignited a rush out of bank stocks and other risky assets and into low-yielding Treasuries, sending the benchmark 10-year yield to 1.78 percent.
That has helped the Barclays Capital Treasury index, which rose 9.81 percent last year, erase early 2012 losses, while S&P 500's gains have been halved since peaking in April.
The most bullish bond investors are betting the yield on the 10 year will tumble to 1 percent before it hits bottom. The case for Treasuries, they say is a simple one: with Europe in recession, China's economy slowing and hopes of robust US growth fading, the global economy is simply too weak to stoke significant inflation or justify higher interest rates.
"With all the uncertainty in the world, it's nice to hang your hat on something you can be sure of, which is that there is virtually no interest rate risk to owning bonds for the next several years," said David Rosenberg, chief economist and strategist at Gluskin Sheff, which manages about $6 billion.
Indeed, Federal Reserve Chairman Ben Bernanke has all but promised that short-term borrowing costs, pinned near zero since 2008, will likely stay there for at least another two years.
"Look at it this way: the Treasury market is like a casino," says Robert Kessler, a Denver-based fund manager who runs Treasury-only portfolios for rich investors and institutions. "And the head of the casino is telling you that you can't lose as long as you keep playing in his casino."
Treasuries certainly were a gold mine for investors in 2011, when the US economy grew just 1.6 percent.
The S&P 500, meanwhile, provided enough volatility to make even the most seasoned investor dizzy, only to end the year where it began for a total return of just 2.1 percent, including dividends.
Kessler, whose fund earned clients 6.1 percent in 2011 and 7.85 percent in 2010, said he expects 10-year yields to hit 1 percent, while Rosenberg expects the 30-year yield, trading just below 3 percent, to end the year closer to 2 percent.
Depressed economic conditions and elevated anxiety have a lot to do with Treasuries' recent stellar performance.
So has the Fed's quantitative easing policy, an attempt to lower long-term interest rates and revive the housing market by purchasing $2.3 trillion of Treasury and mortgage-backed debt.
But doubters say 2011's gains look like the last gasp of 30-year bull run, made possible by a steady decline in inflation.
Between 1981 and 2011, government bonds with maturities of 10 years or more provided an average total return of 11.4 percent, according to Standard & Poor's data.
That puts them neck-and-neck with the S&P 500 index, which returned 11.9 percent for the period, and well ahead of bonds' 85-year average of 6.2 percent.
"That kind of performance is just not repeatable for another 30 years," said Dean Junkans, chief investment officer at Wells Fargo Private Bank, who prefers dividend-yielding stocks, high-yield corporate bonds and emerging market assets to Treasuries.
At some point, bond bears say, interest rates will have to rise as quicker growth stokes inflation, making government debt a terrible place to be.
"The minute we start to see yields rising and prices falling, we'll see a substantial exodus from bonds," said Jeff Sica, chief investment officer at Sica Wealth Management, which oversees $1 billion.
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