Long Term Interest Rates

Chart of the Day  today gives us a longer term perspective on interest rates.

"For some perspective on all-important long-term interest rates, today's chart illustrates the 112-year trend of the 10-year Treasury bond yield (thick blue line). As concerns over government debt as well as a struggling global economy have increased and fears over inflation diminished, investors have moved towards safety resulting in a significant decline of the 10-year Treasury bond yield. The 10-year yield has declined a fairly dramatic 300+ basis points (i.e. 3%) since the peak of the credit bubble. This decline has brought the 10-year Treasury bond yield to a 112-year monthly low. It is worth noting, however, that the quarter-century downtrend of the 10-year bond yield remains intact and will remain intact even if the 10-year yield were to drop significantly below 1.5% over the near-term."

Comment:  10 year rates below 2% are saying that investors have so little confidence in the US economy over the next 10 years that they are willing to accept a rate of return that will likely yield a negative return after taxes and inflation during that time period for the surety of a return on their principal.  Meanwhile the yield of the S&P 500 is roughly 2% and has the capacity to gain in value during that same time period.

Link:  Long Term Interest Rates

*Long ETFs related to the S&P 500 in client and personal accounts.