1. Money
Thomas Kenny

U.S. Treasuries: Low Yields, but Still a Safe Haven

By November 26, 2012

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U.S. Treasuries aren't offering investors much in the way of yield these days, but they continue to fulfill their role as a "safe haven" during times of stock market turbulence. In a phenomenon referred to as a "flight to quality," investors typically flock to Treasuries when bad news drives down prices in higher-risk segments of the financial markets. The events of the past few months provide an example. From its most recent high on September 17 through Friday, November 23, the S&P 500 stock index slid 3.6% on concerns about the oncoming fiscal cliff. During that same period, the iShares Trust Barclays 20+ Year Treasury Bond Fund (ticker:TLT), an exchange-traded fund that invests in long-term Treasuries, rose 4.0% even though the 10-year note was yielding just 1.84% when the rally began. The lesson is clear: for now, U.S. Treasuries remain a useful source of diversification and a hedge against negative headlines.

Learn more:

What is the flight to quality?

Using bonds for diversification

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