Category: bonds

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What’s The Yield Curve and Why Does It Matter?

The yield curve has been a fairly reliable indicator of recessions. But, first, let me clarify what the yield curve is.

The yield curve is simply the annualized yields of various treasuries that mature at different points in time. You can then plot those yields on a chart to visualize the “curve.”

For example, plot the annualized yields for a 3-month treasury on a chart, the 6-month, the 9-month, the 1-year, 2-year, 3-year, 5-year and so on out until the 30-year maturity. Then you connect the dots and it creates a “curve,” much like the sample below. Continue reading “What’s The Yield Curve and Why Does It Matter?”

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And THAT’s Why We Own Treasuries

What a week it has been culminating with the largest bank failure since 2008 (Silicon Valley Bank). I’ll write a special commentary on that in the coming week as I’m sure there are some questions.

Today, I just wanted to point out why we own Treasuries of varying maturities. They certainly haven’t been the greatest investment for the last few years as the Fed has been raising interest rates, but they are in portfolios to serve a specific purpose over the course of a full market cycle. And, as an aside, now they actually offer some attractive yields that they haven’t offered in about 15 years. Continue reading “And THAT’s Why We Own Treasuries”

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Why Do Short-Term Bonds Yield More Than Long-Term Bonds? Who Would Buy Long-Term Bonds Now?

A couple astute observers noticed something about interest rates in my last video. If you missed that video, it can be found here.

Click on the image below to watch today’s short video answering the questions about why short-term rates are higher than long-term rates, who would buy long-term bonds in this scenario and what else does an “inverted yield curve” tell us about the economy? This one is a bit more casual as I wasn’t expecting to make a video today and threw it together fairly quickly. You’d be amazed at how much time goes into even a short video like this!

Enjoy!

 

 

 

 

 

Continue reading “Why Do Short-Term Bonds Yield More Than Long-Term Bonds? Who Would Buy Long-Term Bonds Now?”

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Quick Follow-Up to “Bonds Haven’t Been Here…”

Last week I mentioned yields on Treasuries hitting (or even exceeding) 4% now. So, let’s bring this full circle.

Two weeks ago I wrote a note titled, “No, Stocks Are Not Cheap Yet.” And in that note I provided a range of returns for the U.S. stock market over the next twelve years under a variety of good, average, and bad conditions (see below).

 

The range of returns from this analysis was -5.4% to +3.5% annualized. That means even an optimistic case for U.S. stocks (at least for the conditions in the matrix above) is about a 3.5% annualized return over the next 12-years with an average expected return of about 0%. Continue reading “Quick Follow-Up to “Bonds Haven’t Been Here…””