Buffett Positioning Berkshire Bond Portfolio in Light of Inflation Concerns

Bloomberg reports that Warrenn Buffett is shortening the duration on Berkshire Hathaway's fixed income holdings.

Twenty one percent of Berkshire's bond holdings are short duration and due in less than one year.  This represents a 3 percent increase from eighteen percent on March 31 of this year, and a 5 percent increase relative to the second quarter of 2009.

Shorter duration fixed income instruments are less vulnerable to interest rate risk.  In other words, shorter duration bonds are affected less than long-term bonds when interest rates rise.

The moves by Berkshire are seen by some as an indication that Buffett views rising interest rates and inflation as a near-term possibility.

This view is reinforced by the August 2009 New York Times op-ed piece written by Buffett.  In this piece, Buffett expresses concern about the potential inflationary effects of chronic deficit spending by the federal government.

Source: Bloomberg

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