Thought Bonds Were Safe? Think Again

Investors looking for safety have dived into bonds. They've got a surprise coming

Illustration by Harry Campbell for Time

Investors have spent the past year or so relearning an important lesson: stocks are risky. From May of last year to March of this one, stocks in the U.S., as measured by the S&P; 500 index, lost more than half their value. Many overseas stock markets did even worse.

After being burned, we humans tend to avoid what singed us and seek something soothing. High-quality bonds — in particular, the "risk free" ones issued by the U.S. government — were the most soothing investments of all during the financial crisis. While stocks were losing more than half their value, 10-year Treasuries...

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