Towards Treasuries crash ?

"I’ve been around for 30 years and that includes having gone through 1994 when we probably had about the only savage bear market in bonds over those three decades. There are a number of circumstances that could lead to a repeat of that, probably the most important one being a very dramatic recovery in growth." Jim O’Neill, chairman of Goldman Sachs Asset Management, said in an interview on Bloomberg Television.

"If we have continued signs of a vigorous U.S. recovery, at some stage the Fed’s going to change their view of the world, and that’s what caused the damage in 1994," O’Neill said. Treasuries lost 3.3 percent in 1994 as the Fed increased the target for the federal funds rate in response to inflation threats.

Nassim Taleb is more pessimistic. He believes the "first thing" investors should avoid is U.S. Treasuries and the second is the dollar. « I would rather hold euros than dollars, even as the region’s sovereign- debt crisis persists. Euros have Germany, the dollar has nothing," he said at a conference in Moscow.

« The U.S. is just like Greece, only without the International Monetary Fund to enforce discipline » he said.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. predicted the “end of the bull market” for Treasuries in a report published on Jan. 7, saying the bonds may need to be “exorcised” from model portfolios and replaced with “more attractive alternatives.”

The Pimco Total Return fund reported its treasuries holdings decreased from 22 percent in december 2010 to 12 percent in january 2011. This is the lowest relative holding of government securities by PIMCO since January of 2009 when it was at 15 percent.

Strategists from Natixis also bet on T-notes plunge.

Beyond the budgetary issues of the U.S. government, they highlighted the inflationary risk and competition with other assets.

They believe the United States, unlike many other major countries still enjoy very low inflation, but it should gradually increase and as the gap is closing, its effects on T-notes will be negative.

Also, in a more supportive economic cycle, the T-notes will face competition of other assets as well as sovereign bonds of other world regions. "If the euro succeeds in finding a solution to its budgetary crisis, European government bonds will quickly become much more attractive than those of the United States. In particular, If there should be agreement on the euro-bonds, it would be very difficult for T-notes to compete as European fundamentals are much better than U.S." warn strategists of Natixis.