In my May 2013 E-Newsletter, I warned investors to have some bonds, not all bonds in their portfolios. Over the last 5 years there have been record inflows into bond funds and I wrote that many investors think bonds can’t go down, just because they haven’t gone down much lately.
Well, sometimes there is luck in our timing. By no means do I think I can time the markets (nor do I think anyone else can do so reliably), but according to the Wall Street Journal online, Treasury bonds had their worst month in 29 months in May. The 10-year bond was yielding 2.13% at the end of May. While that is still very low by historical standards, it is more than .5% higher than when the month began. According to Barclay’s in that same article, that means Treasuries have dealt holders losses of about 1.58% through May 30th.
June might be even worse. By the end of the 3rd week of June, the 10-year Treasury closed at 2.5%. All of those further losses were in the 48 hours after Fed Chairman Bernanke said that the economy was improving and that eventually they would stop the measures they have been taking to keep bond yields low.
The bond losses aren’t the end of the world; it’s normal for the market to pull back some times. Markets go up and down all of the time. It’s just further proof that diversifying your holdings by having both stocks and bonds makes sense for most people.