Back in January,
the conventional wisdom held that owning bonds, such as 10-year Treasuries,
would be a lousy idea. At the time, those government notes were yielding about
3.4 percent. Experts were predicting interest rates would rise throughout 2011.
According to these forecasts, bonds would decline in value as investors spurned
the measly 3.4 percent yield to chase after newer, higher-yielding bonds. In
such a rising interest rate environment, "everyone thought bond prices
would fall," said Paul Edelstein, director of financial economics for IHS
Global Insight, a forecasting firm. But the opposite happened. Interest
rates fell dramatically in 2011. Today, newly issued 10-year Treasuries are
yielding only about 1.8 percent. As a result, those old bonds have become much
more valuable — making the people who were holding them very happy.
2011: Market Winners and
Losers
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