10 Year Treasury Hits All Time Low - Approach with Caution

On Thursday, August 18th the 10 year U.S. Treasury briefly dipped down to a record low of 1.99%.  The previous record was a yield of 2.03%.  This dip to historic lows was a culmination of investors fleeing for safety, uncertainty around monetary policy and a plummeting equity market.  The downgrade of the Treasury has obviously not spooked buyers in this space.  However, investors need to be very cautious and it isn't in regards to default risk.  It is the risk of falling prices.  We don't see the 10 year rebounding quickly back to a 4% level anytime soon, but 2% levels will be hard to sustain for the long haul and yields are much more comfortable in the 3% realm.  Approach bond portfolios with caution.