Yields Turn Back the Clock
In October, the 10-year Treasury yield climbed above 5.30%, reaching levels not seen since 2002.¹ This puts yields above those seen during the Global Financial Crisis (GFC) and near levels reached during the Dot-Com Bubble, two periods associated with some of the most notable market sell-offs in recent history. Yet today's economic backdrop is quite different. While equity markets have generally performed well this year, recent volatility has raised questions about what is driving Treasury yields higher.
Interest rates have risen faster than many expected, driven by ongoing inflation concerns, uncertainty about the Federal Reserve's next moves, and growing government debt. Unlike the GFC, when investors sought the safety of Treasury bonds and pushed yields lower, today's higher rates reflect a different set of economic challenges. That said, we think it is important to put today’s rate environment into perspective. The near-zero interest rates we saw in 2020 were unusual, not the norm. While the speed of the recent move has created volatility, investors should not necessarily expect rates to return to the ultra-low levels we became accustomed to following the pandemic. Instead, higher interest rates may simply be part of a return to a more historically normal rate environment.
Disclosures
The statements provided herein are based solely on the opinions of the Osaic Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Osaic Wealth, Inc. (“Osaic”) or its affiliates.
Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.
Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.
Securities and investment advisory services are offered through the firms: Osaic Wealth, Inc. and Osaic Institutions, Inc., broker-dealers, registered investment advisers, and members of FINRA and SIPC. Securities are offered through Osaic Services, Inc. and Ladenburg Thalmann & Co., broker-dealers and members of FINRA and SIPC. Advisory services are offered through Ladenburg Thalmann Asset Management, Inc., Osaic Advisory Services, LLC. and CW Advisors, LLC., registered investment advisers. Advisory programs offered by Osaic Wealth, Inc. are sponsored by VISION2020 Wealth Management Corp., an affiliated registered investment adviser.
_____
1 The 10-year Treasury yield hit a 19-year high in September – Why is it so important? | JP Morgan
9187161