Consider your own investing strategy — if you can get a higher rate of return from the relative
safety of bond yields, would you not expect a higher rate of return to take on the higher risk of stock investment?
Not exact matches
Also, as
bond rates rise, some
of the money that migrated over from the
bond market in search
of higher
yields will return to the
safety of fixed income.
Cash more liquid but
bonds you'll get a better
yield and more
of a flight to
safety during the down times (usually).
You're right that the margin
of safety is so much smaller in
bonds because the
yield won't be there to pick up the slack.
Of course, mortgage rates could move lower if investors head to the relative safety of the bond market and drive yields dow
Of course, mortgage rates could move lower if investors head to the relative
safety of the bond market and drive yields dow
of the
bond market and drive
yields down.
Think
of it this way — if a
bond is externally rated as BBB, and my firm's internal credit rating team deems it to be AA, then we are simultaneously purchasing the
safety and security
of a AA
bond while also benefiting from the
yield of a BBB
bond.
When the economic news is good and our growth is unmistakable, our investors will move from the
safety of bonds and the
yield will go up.
Creditworthy
bonds are a
safety net, and the price
of that
safety is low
yield.
Investors in taxable accounts enjoy both the
yield and
safety of bonds but the lighter tax treatment
of dividends.
But given low
bond yields and modest projected returns for stocks in recent years, a number
of retirement experts have cautioned that the 4 % rule might not provide the same margin
of safety against running out
of money as it has in the past.
However, because
of this inherent
safety, the average mortgage
bond tends to
yield a lower rate
of return than traditional corporate
bonds that are backed only by the corporation's promise and ability to pay.
So if you're looking for the
safety of Treasuries but with much higher
yields, muni
bonds aren't as boring as they used to be.
Investors are running to the
safety of bonds despite their low
yields.
just as
bond managers look at
yield spreads to commit capital, so should investors in risky assets aim for a margin
of safety in what they invest.
The
bond market is bigger than the stock market, and those that invest there are brighter in one sense — they have to make decisions over small differences
yields, versus the
safety of those
yields.
But
bond yields (as discussed above) are down about 15 basis points (all over the past month)-- which means demand coming into the
safety of Treasurys (
bond prices up,
yields, down).
Driven by a flight to
safety, investors bought more U.S. Treasury
bonds, keeping 10 - year treasury
yields below 2.0 percent during most
of the fourth quarter.