The 2014 Low-Yield Conundrum
If there is one thing that every investor should understand, it is that often the conventional wisdom on Wall Street just doesn’t play out. A prime example of this situation is the downtrend in interest rates so far in 2014.
At the beginning of the year, the U.S. Federal Reserve began the much-talked about “taper” of quantitative easing, or QE. So far, the Fed has reduced its bond buying from $85 billion per month down to $55 billion per month. Conventional wisdom says that the reduction in bond buying from the Fed should have caused interest rates to rise. However, this just hasn’t happened yet.
As of this writing, the yield on the benchmark 10-Year Treasury Note is just above 2.7%. That metric is way down from the 2.99% level on Jan. 2. In percentage terms, that’s more than a 10% drop in yield — a move that’s left a lot of bond watchers scratching their heads in amazement.
So, why have rates been so low despite the Fed’s tapering?
Read more about what this year’s low yield means for investors at Eagle Daily Investor.