Warren Buffett: Bond investors world-wide 'face a bleak future'

While Warren Buffett isn’t known to prognosticate on where interest rates are heading, he warns that fixed-income investors “face a bleak future."

“[B]onds are not the place to be these days,” Buffett wrote in his annual letter to Berkshire Hathaway (BRK-A, BRK-B) shareholders.

His warning comes amid a sharp rally in long-term interest rates that saw the 10-year Treasury yield (^TNX) recently touch its highest level in a year. Though it's worth noting interest rates have been trending lower for nearly 40 years.

“Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981?" he wrote. "In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future."

Insurance represents the largest of Berkshire Hathaway's four "family jewel" businesses. Though unlike other insurance companies, Berkshire takes a more equity-heavy approach when investing its insurance float.

According to Buffett, Berkshire’s insurance fleet has more capital deployed than any of its competitors thanks to the financial strength of the operation and the “huge cash flow” generated by the non-insurance businesses.