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Buffett 'Baffled' By People Buying The 30-Year US Bond

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Buffett 'Baffled' By People Buying The 30-Year US Bond
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Why would anyone buy a 30-year U.S. bond, especially at a time when the "Trump rally" is showing little signs of cooling off?

While there are many logical and rational reasons for owning a different asset class than equities, the "Oracle of Omaha" himself Warren Buffett admitted he is "baffled" by people buying the 30-year bond.

Buffett said during a CNBC interview on Monday that the low-interest rate environment has helped to boost stock prices higher. Meanwhile, U.S. bonds, be it the 10-year or 30-year are offering investors a return of around 3 percent, which isn't as attractive to even a "mild-growth prospect" company.

See Also: Warren Buffett Doubles Apple Stake, Cheers iPhone Maker's Stickiness

Buffett's comments might help to explain the 0.17 percent decline in the iShares Barclays 20+ Yr Treas.Bond (ETF) (NASDAQ: TLT).

The billionaire investor himself argues that money is better allocated towards companies, not treasuries — and this holds true for a hypothetical 50-year or even 100-year bond that may be issued to finance President Donald Trump's infrastructure spending plans.

Buffett said he wouldn't touch a 50-year bond "in a million years" at current interest rates but he did acknowledge that the only form of bonds that his investment firm Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) is very short term in nature.

Image Credit: By USA White House [Public domain], via Wikimedia Commons

Posted-In: 30 Year Bond bondsCNBC Bonds Top Stories Economics Markets Media Best of Benzinga

 

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