Long-term rates are creeping higher
With all the election chatter and stock market volatility, it may have been easy to miss the ongoing uptrend in longterm interest rates. The yield on the 10year Treasury bond is sitting just below 1%. Just a few short months ago, the 10year was yielding roughly 0.5%.
What’s fueling the rally? More demand for money, which is the result of a pickup in economic activity. When businesses see economic conditions improving, they look to expand their operations. When entrepreneurs see exciting new opportunities, they look to raise money to finance their projects.
By contrast, a weaker economy tends to promote a “flight to quality,” which increases the demand for treasuries and drives yields lower.
Will interest rates continue to go higher? That’s uncertain. Rates fluctuate, and there’s a possibility that long-term interest rates may reverse course and start to trend lower. A lot will depend on business confidence in the months ahead.
With rates ticking higher, some people may
What’s fueling rally?
wonder if it’s an opportunity to boost bonds’ exposure to capture the higher rates. It’s a good thought, but you can consider many factors before boosting the bond portion of an allocation model, including the outlook for inflation, the dollar, and other macroeconomic factors.
Treasury bonds are guaranteed by the federal government as to the timely payment of principal and interest. By holding a bond to maturity an investor will receive the interest payments due plus your original principal, However, if you sell a Treasury bill prior to maturity, it could be worth more or less than the original price paid. Investments seeking to achieve higher yields also involve a higher degree of risk.
Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been
derived from sources believed to be accurate. Please note — investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular
investment.
Richard H Mootz, CFP® CERTIFIED FINANCIAL PLANNER™ professional, is a Registered Representative of and offers securities through Securities America, Inc., a Registered Broker/ Dealer, member FINRA/ SIPC., Advisory Services offered through Securities America Advisors,
Inc., A SEC Registered Investment Advisory firm. Mootz Financial Solutions and Securities America Companies are not affiliated. Mootz can be reached at (530) 8777007 — by e-mail rick@ mootzfinancial.com or visit the website at www. mootzfinancialsolutions. com Securities America and its advisors do not provide tax or legal advice. Please consult with your tax or legal professional regarding your individual situation. CA Insurance Number 0C75924