Based on the low interest rates environment, it makes sense to borrow long term money and invest. for example you can invest in real estate with borrowed money and reap the benefits when interest rates eventually shoot up in long long term.
The Bond returns for 10 year treasuries were 4.5% & 8.8% in respective bear & bull market cycles. Its counter intuitive, as you'd expect to have returns of 15% when interest rates are 15%, how do you get only 4.5%?? As interest rates rise, bond values fall. So from 1951-1980s, though interest rates were high, values of bonds fell for long term investors at an average. Somebody who bought just at peak of bond rates rise in 1980s and never sold till maturity would have enjoyed the best returns. But its hard to be market timer even in bond markets.
According to legendary PIMCO bond fund manager Bill Gross, he is calling End of QE2 as "d-day" for bonds melt down. Though he had posed similar passimism at end of QE1, but interest rates fell like rock after is End of QE1 projections.
But one thing to notice here is that during last few years in US economy fell in recession and all bond interest rates shot up due to reduced credit ratings and hugh pessimisms over corporate detaults. This economic draft had impact on interest rates as well. During recovery of 2010, markets adjusted the interest rates & they were expecting QE2 as well. It was extremely hard to anticipate such a swift ecomonic recovery & its impact on interest rates.
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