A recent report on Bloomberg News stated the yield on US Treasuries 10 year benchmark has hit a 2 year high, 2.93%, the highest since mid-2011.
“Economic growth is continuing at a moderate pace,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $11 billion in fixed-income assets. “We’ve pretty much priced in the effects of the Fed slowing down bond buying later this year”
What does this mean for us as depositors? Good news in the sense that the options for a higher yield is strengthening. For us as tax payers it can mean the interest we all owe on our national debt is going to be higher and our annual budget debt much bigger.
So good news or bad news, I think it is mixed news. One the good side it appears the job market and the economy are getting better. Higher yields means annuities will have more to offer and banks will probably fallow suit later in the year with increased rates.
If you are an owner of longer term US Treasuries, I do have bad news for you, according to the Bloomberg article said: U.S. government securities due in a decade and longer plunged 14 percent in the 12 months through yesterday, the biggest loss of 174 debt indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies.
It’s the old reverse value rule: interest rates increase then the value of current bonds will decrease.
Here is a link to the article: http://www.bloomberg.com/news/2013-08-22/treasuries-show-inflation-expectations-falling-before-tips-sale.html