Treasury Investments
September 20th, 2007
Question: what are the investment risks with long-term treasury bond exchange traded funds?
Considering the iShares Lehman 10-20 Year Treasury Bond Fund (TLH)
Answer: John hit the nail on the head, but perhaps you would like more specifics. TLH currently pays 4.2% interest. There are mainly two risks that are associated with this particular fund. 1. the risk that long term interest rates might rise. 2. that inflation is going to increase. Note that the current interest rate is already below the inflation rate, about 2-4% before taxes and more after taxes. There are other risks including as John mentioned credit risk. Should U S debt really be rated AAA. In my opinion about B- would be a more accurate rating. There is also the risk that taxes might rise. Considering the budget deficit of the country, it seems very likely. Another risk is that the current financial crisis might abate. That would make U S paper less attractive to investors.
Kingdom Treasury Investments, Holdings and Securities ~ 1 of 3 ~ Dr. Myles Munroe
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