Best and worst investment ideas for 2015

Treasury bonds: Victim of Fed rate hikes
Treasury bonds: Victim of Fed rate hikes © larry1235/

Treasury bonds: Victim of Fed rate hikes

Treasuries this year confounded most prognosticators, who anticipated yields would rise as the Federal Reserve tapered its quantitative easing and economic growth strengthened. But the Fed's low interest rate policy continued to depress yields.

The consensus among analysts is that the central bank will begin increasing interest rates around the middle of 2015 and that's bad news for Treasuries, which have rallied since 1981. "The Fed will finally raise rates, or there will be anticipation of a rate rise," Solaris' Ghriskey says. "Has the world been wrong for a long time (in predicting higher yields)? Yes, but it's inevitable."

The average forecast of Fed policymakers is that the central bank's federal funds rate target will end next year at 1.27 percent, up from zero to 0.25 percent currently, according to Convergex's Colas.

"I think the Fed is true to its word," he says. "And if it goes to 1.27 percent, there's no way the 10-year Treasury yield stays around 2.35 percent."

The yield stood at 2.33 percent on Nov. 14, and Colas predicted it will rise to 3 to 3.25 percent next year. But he injects a note of caution.

"To call an end to a rally of that kind of magnitude is spicy, though I think the facts support it," Colas says. Stronger economic growth in the U.S. than in Japan and Europe should draw investors to Treasuries.


Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

Where should I put my money?

Dear Dr. Don, I would like to begin investing money to use in retirement. I want to be conservative with these investments, and I don't know where to begin. Any advice on retirement investing would be appreciated. Thank... Read more



Dr Don Taylor

ETFs in retirement accounts

The availability of ETFs in retirement accounts gives investors access to a wider array of investments, but not all choices are appropriate in these accounts.  ... Read more

Partner Center

Connect with us