U.S. Treasury securities have become investing’s safe haven and the future is bound to provide more unpleasant surprises. Thus, Treasuries may deserve to be core holdings for many investors. Bonds are meant to provide portfolio stability, especially when equity markets slide, and no bonds have done that better than Treasuries.
Which Treasuries should you buy? The traditional safe haven has been short-term Treasuries. In times of stress, the greatest demand is for two- to five-year Treasuries. Moreover, current market conditions favor Treasuries that are short-term, but not too short.
As of this writing, investors can virtually double their yield, from less than 2 percent to nearly 4 percent, by going from six-month to five-year Treasuries, yet five-year Treasuries won’t fluctuate much in price as interest rates change. Especially with maturities of three to five years, you can get a much higher return than you can get with money market funds or day-to-day bank accounts.
