Quote from Maverick74:
This statement is a contradiction.
No it's not.
Let's say I buy 2's today, betting that the economy will go nowhere. So I keep them for a year, collect my 1/2% yield, and if rates stay unchanged that's my best scenario - I've made 1/2%.
The worse scenario is that the fed raises rates to say 3% over the next year, which is very plausible considering what the fed's moves were coming out of the last recession. As a result, the value of my bonds drops maybe 3% and after clipping my coupons I'm down maybe 2.5%.
In other words, I've got an interest rate risk that's 5x my best case scenario profit. That's pretty horrible. Obviously back of the envelope, but the point is that the risk in long bonds HUGELY outweighs the reward if you're right.