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The case for investing in Government Bonds

Posted by jdavis on February 19, 2015

Here is the chart of the last couple of years of the price of US Bonds.

As you can see, after a pullback in the 1st half of 2013 - whereupon it seems every fund manager on the planet turned bearish, the price stabilised for a few months.  Then, from 1 January 2014 this asset soared.  I remind you this is the most owned asset in the World.

During the second half of 2013 we were strongly recommending our clients invest in Government Bonds and, in particular, US Treasuries (due to our expected strength in the US $).  In June 2014 we wrote the following - publically:

From June 13 2014

"The above represents US Treasuries i.e. lending to the US government, similar to UK Gilts.

Clearly, this has been storming ahead since the start of the year. It had a bad year and the entire media 'told' everyone to sell government bonds.

We didn't. We remain confident of US Treasuries. The strength also points to economic weakness...which is another reason why we remain concerned for Developed Market share prices."

And we reiterated it publically in August 2014 and again and again, for example, here

Our clients have been increasingly heavily invested in one of the stars of investing successes of 2014.  We see every reason for this to continue in 2015 and perhaps 2016 too.

We would point out that Japan had broadly similar issues to the West for over 2 decades and their Government Bonds were brilliant for that long.

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