Warren Buffett once called bonds a terrible investment but later massively invested in them. Here's why

As global bond yields continue to soar to multi-year highs amid ballooning government debt, investors remember why market legend Warren Buffett once called long-term bonds “terrible” but heavily invested in short-term bonds years later.

In his 2017 annual letter to Berkshire Hathaway shareholders, Buffett advised investors to ignore the price swings on Wall Street and the temptation to load up on bonds despite soaring yields. He called it a "terrible mistake" for investors with long-term horizons to measure their investment "risk" by their portfolio's ratio of bonds to stocks.

"There is simply no telling how far stocks can fall in a short period," Buffett said. "As an investor's investment horizon lengthens, however, a diversified portfolio of US equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates,” he added.


In December 2007, Buffett bet that over the next 10 years, a portfolio consisting of hedge funds would not be able to beat the S&P 500 index.

In his 1979 letter to Berkshire shareholders, Buffett highlighted that he has severe doubts as to whether a very long-term fixed-interest bond, denominated in dollars, remains an appropriate business contract in a world where the value of dollars seems almost certain to shrink by the day.

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Berkshire Hathaway's massive bond investments

However, Buffett’s bearish view on bonds was limited to long-term contracts. While the majority of Berkshire’s portfolio consisted of equity bets, he allocated a portion to short-term US bets. He believed that such bond investments ensured liquidity.

Berkshire Hathaway last year doubled its ownership of Treasury bills and owned 5% of all short-term Treasuries, according to a JPMorgan report, cited by CNBC. As of March 2025, the total US Treasury bill market stood at $6.15 trillion, while Buffett’s firm amassed $300.87 billion. This meant that Buffett controlled nearly 1 in every 20 dollars in circulation within the system at that time.

Investors remember the billionaire's investment strategy amid the ongoing global bond selloff. The yield on 10-year US Treasury notes rose to a near three-year high of 4.81%, amid an overall global selloff in the bond market as the Middle East conflict pushes energy prices higher, boosting investor fears about inflation and ballooning government debt. Japan's ⁠10-year yield meanwhile soared to a 30-year high above 3%. Australia's 10-year government bond yields rose to 5.198%, their highest level in over 15 years. Bond yields move inversely with bond prices.

Indian 10-year bond yields also joined the rally, briefly topping 7% for the first time in three months on Wednesday as a deepening global debt selloff and a fresh spike in oil prices rattled investors. Rising bond yields typically make the debt market more attractive to investors, which often leads to some downturn in the equity market.

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(With inputs from agencies)

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