Not exact matches
In addition, housing and the economy should
get a lift from the plunge in 10 -
year U.S. government
bond yields to 3 %, and, if the economy needs it, a new round of quantitative easing from the Federal Reserve.
We have found that stocks and
bond yields historically have been positively correlated until the 10 -
year yield gets up around 5 %, at which point the correlations break down.
At this point, it's human nature to say — as I've often heard from clients over the last 39
years, whenever short rates rise above long rates — why buy a 20 -
year bond when I
get a higher
yield on a 2 -
year piece of paper?
It doesn't help that 10 -
year bond yields are still lower than the prospective operating earnings
yield on the S&P 500 (the «Fed Model»), not only because the model is built on an omitted variables bias (see the August 22 2005 comment), but also because the model statistically underperforms a simpler rule that says «
get in when stock
yields are high and interest rates are falling, and
get out when the reverse is true.»
He was commenting on that 400 - point - plus swan dive for the Dow yesterday, as 10 -
year bond yields galloped into 3 % territory and even forecast - beating earnings
got tossed aside.
2) Municipal
bonds: $ 100,000 if the 10 -
year yield gets back up to 2.3 % and $ 300,000 if the 10 -
year yield gets back to 2.5 %.
He said changes in government
bond yields, worsened by Brexit, meant «20
years of investment return is missing that we've
got to try to make up from employers».
But while you could
get 5 % on
bonds a decade ago, the current
yield on 10 -
year Government of Canada
bonds is about half that today.
If you've bought the Tesco
bond above for # 110, but you'll only
get # 100 when it matures, the redemption
yield would be 2.2 % (assuming the
bond matures exactly four
years from the purchase date).
If the new investor buys the
bond for $ 900, while the coupon rate will still be 6 %, the
yield will be higher — both because he only has to invest $ 900 to
get $ 60 a
year and because he'll
get back $ 1,000 when the
bond matures.
Low as the dividend
yield is on stocks at the moment (2.04 %), it's still better than what you can
get on a 10 -
year U.S. Treasury
bond.
Bond yields hit their
year - to - date lows in early September, with the 10 -
year Treasury
yield getting as low as 2.03 % before trending back up towards 2.40 %.
To
get any sort of real
yield in the current low rate environment, investors have been forced to go out on the maturity ladder and into longer - dated
bond funds like the iShares Barclays 7 - 10
Year Treasury (NYSE: IEF).
But then, even Marks
gets snagged by the «hook» — basing his view of stock valuations on «projected earnings for the
year ahead,» and the corresponding «earnings
yield» compared with the
yield on
bonds (see Investment, Speculation, Valuation, and Tinker Bell for an extensive historical perspective on this metric, compared with far more reliable models).
George, I'm really glad to see that the Treasury has finally
gotten a lick of sense, and is re-issuing the 30 -
year, which they should be able to at
yields lower then the current long
bond maturing in 2031 (probably 10 basis points lower).
The sell - off in U.S. and Canadian
bonds has raised
yields due within 10
years to levels at which investors can finally
get decent returns, according to Moore, who co-manages more than $ 50 billion in Canadian and U.S. fixed income for Fidelity.
You'll still
get your 2 % per
year, but if you'd bought that
bond one instant after if fell in price then you'd own the exact same high quality instrument with a higher
yield to maturity than the 2 %
yielding bond.
No one is going to buy a 10 -
year bond that
yields only 1 %, if instead they could loan that money out elsewhere for a similar period and
get 3 % interest.
Interestingly, the last
bond that priced before I left was the Zambia 10 -
year which priced at 5 3/8 th
yield which was probably a good sign to
get out of that market.