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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.

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archive

The 2014 Low-Yield Conundrum

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.

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??taperâ?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.

Newsletter Signup.

Sign up to the Human Events newsletter

Written By

Doug Fabian is the editor of Successful Investing and High Monthly Income, and is the host of the syndicated radio show, "Doug Fabian's Wealth Strategies." Taking over the reigns from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbertâ??s Investment Digest. For more than 30 years, Successful Investing (formerly the Telephone Switch Newsletter) has produced double-digit annual gains. Doug has become known for his expert knowledge and timely use of innovative tools like Exchange Traded Funds, bear funds and Enhanced Index funds to profit in any market climate.

TRENDING NOW:

YouTube Won’t Let You Watch Lauren Southern’s ‘Borderless’

FOREIGN AFFAIRS

DONKTUM: Restricting the Range of Consciousness.

CULTURE

Lauren Southern’s Borderless Deleted By YouTube. ENOUGH.

U.S. POLITICS

Farage: ‘No No to BoJo’.

FOREIGN AFFAIRS

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