If there is one thing that every investor should understand, it is that often the conventional wisdom on Wall Street just doesnâ€™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 â€śtaperâ€ť 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 hasnâ€™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, thatâ€™s more than a 10% drop in yield — a move thatâ€™s left a lot of bond watchers scratching their heads in amazement.
So, why have rates been so low despite the Fedâ€™s tapering?
Read more about what this year’s low yield means for investors at Eagle Daily Investor.