EFF/KRF: Perhaps, but you would have to put a high probability on deflation. Severe downturns in business activity do not always result in deflation. For example, during the depression of the 1930s, some countries experienced deflation and some experienced hyperinflation. There is lots of talk currently about deflation, but the huge commitments the Fed has made recently seem to be pushing toward higher inflation.

Keep in mind that short term bonds are better hedges against unexpected inflation than long-term bonds. When I roll over short-term bonds, I take advantage of market updates of inflation forecasts. When I hold long-term bonds, the inflation forecasts built into their prices are likely to become outdated as time passes. Suppose, for example, we have modest unexpected deflation for the next few months followed by high unexpected inflation. A long term bond strategy would work well during the brief period of deflation, but this strategy would suffer a lot when the inflation rate rises unexpectedly.