Pimco’s Kiesel, Other Money Managers Trash Treasurys

Friday, 22 Jun 2012 12:12 PM

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A growing list of major investors are expressing disdain for Treasurys, saying the drop of their yields to record lows makes the securities quite unattractive.

You can add Mark Kiesel of Pimco, Don Yacktman of Yacktman Funds, and Meggan Walsh of Invesco to that list. They tell Morningstar’s Investment Conference that the risk for Treasurys is all on the downside.

Bond-fund manager Kiesel noted that long-term Treasurys could shed 12 percent of their value if interest rates rise by 1 percentage point. But the corporate bonds in his portfolio would likely break even, he says.

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Yacktman and Walsh say Treasurys are pointless with yields near zero, when you can purchase blue chip stocks with much higher dividends and solid growth prospects.

The 10-year Treasury yield hit a record low of 1.44 percent earlier this month.

Walsh likes stocks with strong yields, but not the highest payouts. Extremely high yields often signal a company with problems – and a dividend cut to come.

"Historically you want to be upgrading the quality of your companies at this point in the economic cycle," she says.

Yacktman acknowledges that blue-chip dividend payers aren’t cheap now, but says they still beat Treasurys hands down.

If you are interested in blue-chip dividend stocks, the market’s recent volatility has sent them to what look like bargain levels for short periods. So you might take advantage of one these downdrafts to jump in and buy.

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