Rosenberg Daily: The case for Treasuries

Have a look at the household balance sheet:

• Households own $18.2trillion of residential reale state,even after the value destruction of the past three years.
• Households own $18.1trillion of equities,despite the vicious bear market
• Households own a near-record $7.7 trillion of deposits and cash — earning next to nothing in yield.
• Households own $4.6 trillion of consumer durable goods.
• Households own $3.5 trillion of corporate bonds and municipal/agency paper.
• What do households own in Treasury notes and bonds? Try $800 billion.

Now tell us, (i) what is under-represented on the household balance sheet, and (ii) what is the next big move going to be? Indeed, looking at the ongoing redemptions in equity funds and allocation towards fixed-income over the past year, we can see this huge demographic-related move into safety and income...

The next recession is likely anywhere from two quarters to two years away, and the only question will be is whether the last cyclical low of 2.08% reached on December 18, 2009 will hold or not. But you may want to be aware that before anyone can call the end to the secular bull market in government bonds we would first have to see the 10-year T-note fail on an approach of that level. This is why selloffs in Treasuries offer terrific buying opportunities, especially since we are on the cusp of seeing the deleveraging in the broad private sector about to swamp the massive balance sheet expansion in the public sector. This is a process that will likely prove to be highly deflationary and extremely conducive to lower yield activity.

---Rosenberg, 2/16