Treasuries are the latest financial canary to suggest the bond party may be endangered.   The yields are rising which means the value of existing treasuries are dropping.  To simplify- it now costs less to buy a specific dollar amount of income.  That means what you already own is worth less.  Adding insult to injury is that investments based upon similar debt products are similarly affected.

You can pay more, get less..... and face unexpected downside risk.

The ten year treasury yields are trading in the  super low 2.6% to 2.7% range after lingering below 2.5% for much of the recent past.   This doesn’t seem like a large change but, seen in percentage terms, it is a major change.....and a disturbing trend.  As low yields represent high prices this trading fluctuation is flirting with price declines....another worrisome similarity to the real estate crash.

The impact on investors who “fled to security” by purchasing bond products could be severe especially if competing investments continue to offer substantially higher returns.  The August double dip scare proved  unfounded.  The economy didn't double crash to new lows as some predicted.

Today many investors are no longer willing to accept the meager returns, or the erosion of value, from so called "safe harbor" investments.  While the economy is far from healthy there are investments structured to perform well in troubled waters.  Smart investors are finding them and buying.

Some newly formed Real Estate Investment Trusts are providing 7% dividends.   Many of the Non Traded Reits purchased high quality properties at the current low prices; the quality of these properties should provide a buffer against capital loss.  Should property prices rise as predicted then these REITs have the potential to create attractive capital gains.  Many investors find these new Non Traded REITs particularly attractive.

Real estate focused LLCs and Note programs are offering 7-12% yields but most are only open to “accredited” investors.  These products require substantial due diligence and should only be purchased through firms and advisors with deep industry knowledge. The old truism “it’s all about the property” applies.  

The current bond and annuity market has dangerous parallels with the real estate bubble.  Bonds and annuities may continue to have a place in portfolios but investors should be very careful to understand the inherent risks in a bond bubble market.