On February 26, I wrote that given the market action in US government bonds that it might be the prudent time to sell anything 10-years and out. At that time the 10-year Treasury had a yield of 1.33%, while the 30-year Treasury bond was yielding 1.82%. Nine days later and the 10- and 30-year are yielding 0.71% and 1.26%, respectively (as of 9:35 am). Incredible, yes, but it provides plan sponsors with a unique opportunity. There have been tremendous gains from your active fixed-income portfolios. Even if rates fall from these levels, the overall return will be muted. Now is the time to rotate active fixed-income into a cash flow matching strategy that defeases your plan’s Retired Lives liability. We’d recommend cash flow matching the next 10-years liabilities chronologically. Use bonds for their income and known terminal value to secure the promised benefits.

In periods of uncertainly there is opportunity. This may prove to be the trade of the century!