Yields and Bonds - Where are real interest rates going?
3/3/20. Weekly Charts of TLT (20 yr bond ETF) vs TNX (10 Yr Treasury yield) compared.
In order to crush high inflation, They raised interest % in late 70's - early 80's. As a result, the rate peaked in 1981 and 10 Yr Yield was near 16% and mortgage rate was 17-18%. People were getting 9% interest on simple CD from the banks. Today, 3/3/20, The 10 Yr yield briefly nose dived below 1% but then came right back up. Bond funds like TLT has been great investment so far but to think the ride is going to last much longer is not practical. Some people talk of negative yields and I always try to remind myself that I must assess Risk vs Reward, not what people say, and I also know that I live in a reality, not a fairy land. Creditors are going to want more return on their money soon or later.
In order to crush high inflation, They raised interest % in late 70's - early 80's. As a result, the rate peaked in 1981 and 10 Yr Yield was near 16% and mortgage rate was 17-18%. People were getting 9% interest on simple CD from the banks. Today, 3/3/20, The 10 Yr yield briefly nose dived below 1% but then came right back up. Bond funds like TLT has been great investment so far but to think the ride is going to last much longer is not practical. Some people talk of negative yields and I always try to remind myself that I must assess Risk vs Reward, not what people say, and I also know that I live in a reality, not a fairy land. Creditors are going to want more return on their money soon or later.
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Looks like a turning point