Treasuries Yielding More than Before
What is it?
The 10-Year U.S. Treasury bond yields hit 5.02% Monday morning, the highest yield since 2007.**
Data came out last week that showed a stronger than expected labor market* While that may be a good thing now it could have harsh implications for the future. With higher yields, the U.S. government will have to pay out a higher amount of money to those that buy the bonds.
Why does it matter?
“When a Treasury is paying much more in interest, investors feel less need to pay high prices for Big Tech stocks, cryptocurrency or other investments that carry more risk.”**
While the economy has been strong, there are a lot of things making this difficult to sustain. Investors and consumers could be biased to optimism due to the easier conditions in the last few years. With bonds giving out favorable yields, we will see if the market prefers stock/ETF positions or the bonds moving forward.
We are currently invested in some funds that own bonds and others that own stocks. The exact makeup of the portfolio will be specific to each account. As conditions change, we will adjust the tactical models as we see fit.
Other articles we found interesting this week:
Chinese stocks have erased 4½ years of gains as foreign investors flee at record pace
BlackRock warns of US earnings stagnation, remains bullish on AI, Japan
Chevron to buy Hess Corp for $53 billion in all-stock deal
Current 401(k) portfolio
Our last 401(k) portfolio reallocation: 8/14/2023.
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Sources:
*Chris Anstey, Thyagaraju Adinarayan and Jack Sidders. “The 5% Bond Market Means Pain Is Heading Everyone’s Way”. Yahoo Finance. 10/23/2023. https://finance.yahoo.com/news/5-bond-market-means-pain-040010668.html
**Stan Choe. “The yield on a 10-year Treasury reached 5% for the 1st time since 2007. Here’s why that matters”. Yahoo Finance. 10/23/2023. https://finance.yahoo.com/news/yield-10-treasury-reached-5-131529467.html
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