Political guru James Carville said: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
Indeed, the US bond market’s appeal last week to global investors in the face of sovereign debt crises in Europe, collapsing public equity markets, S&P’s antics, and disappointing financial news clearly demonstrated fierceness reminiscent of Hulk Hogan. While fans of the US bond market, like fans of pro wrestling superstars Hogan and The Undertaker, are willing participants in a charade, there is something to be said about a 30-year bond yield of 3.7% in spite of the S&P downgrade. Many prominent Wall Street economists are currently forecasting the 10-year Note to fall below 1.95% in 2012!
My question to you is whether we are in for a longish period of low treasury yields? Japan has had 15 years of low interest rates. Fed Chairman Ben Bernanke stepped into the ring last week promising us low rates through mid 2013. While inflation is a contender to ruin the show, it is reasonable to entertain the possibility of five or more years of low yields. After all, who wants to challenge the mighty Long Bond?
Acquiring high quality assets with a steady tenant roster continues to be an optimal strategy for commercial real estate investing. As compared to miniscule Treasuries yields, stabilized core and select suburban core office buildings in primary and secondary cities can provide compelling commercial real estate investor returns. Well-positioned multifamily assets purchased at sensible valuations have exceptional merit for private investments. (credit d, pryor, globe st)