Sure, Treasuries are safe, but they're a lousy deal

— -- Normally, you should have a good reason to make any investment, and a good reason isn't "because everyone else is." Right now, there aren't any good reasons to invest in Treasury notes and bonds, even though everyone else on the planet is buying them. If you need income from your investments, you can do better elsewhere.

The U.S. government owes $11.5 trillion to, well, just about everyone. It finances that debt by issuing Treasury securities, which are interest-bearing IOUs.

What is most remarkable about the public debt is how little interest the government has to pay. A three-month T-bill currently pays 0.17% annual interest, meaning that if you invested $1 million in a three-month T-bill, you'd get all of $425 in interest.

You get more interest by investing in longer-term Treasuries. For example, the most recently issued 10-year T-note yields 3.58%. But even that is low by historical standards: 10-year T-notes have averaged a 6.45% yield since 1953.

It's unlikely that yields on Treasuries will remain this low for long. The main reason: supply and demand. As the U.S. adds to its debt each year, it will have a harder time finding investors willing to buy its Treasury securities.

The U.S. doesn't have enough investors to buy all of its debt, and it's increasingly relying on foreigners to sop up any excess. Ten years ago, foreign investors owned 22% of U.S. debt; today they own 29%. China is our largest creditor: It owns $802 billion of Treasury securities. Japan is next in line, with $677 billion, according to the Treasury.

At the moment, demand is on the side of the U.S.: In times of financial turmoil, investors seek the safety of the government's guarantee. Treasuries are so safe that they have virtually no default risk. (And if the government does default, you'll have bigger things to worry about than your T-bills.)

Sooner or later, however, demand will slow down, and the Treasury will have to pay higher interest rates to attract new investors. "You can't issue this much debt without having either an inflation or a supply-and-demand issue," says Craig Elder, fixed-income analyst at Robert W. Baird & Co., a Milwaukee-based investment company.