Ricks Picks

Why You Should Pounce on 2.57% Yields


Stocks took another bold leap Friday, heedless of payroll data that suggest U.S. employers pulled back on hiring in May across all sectors of the economy. Their clear concern is a global slowdown in China and Europe that appears to be deepening. Copper and crude oil quotes have signaled this as well with a 12% fall in the former and a 20% plunge in the latter. So has the Ten-Year Note, which is close to slipping below 2% for the first time in more than two years.

Despite this, Wall Street was its blithely exuberant self on Friday, closing out its best week in months. The Dow tacked on 263 points, bringing the five-day gain to 1142 points. Not bad. But not good, either, since it was just reflex reaction to talk of Fed stimulus that can hardly be expected to prop up the economy while our major trading partners go down the tubes.

A Capital Gains Kicker

Are investors perhaps counting on U.S. stocks to attract increasing sums of safe-haven capital as the global economic picture darkens? If so, this promises to be a great bet until the day it isn’t. Our advice is to lock in 2.57% returns on the 30-Year Bond while you can, since that rate could look pretty juicy when flight-to-safety money from around the world eventually panics into T-bonds, as it inevitably will. Were you aware that T-bond holders can rack up annualized gains of 20% or more when long-term yields fall hard? That’s not bad just for playing it safe.

Comments on this entry are closed.

Mike Marinelli June 13, 2019, 1:38 pm

I could buy EDV but does that lock in that rate of 2.57% if the 30 year yield goes down to 2%? I want the 2.57% and 20% annualized gains from rates dropping to 2%. Thanks, Mike


Why care about the loss of 0.57% yield when you’ve offset it with a huge capital gain? If your heart is set on 2.57%, you can always hold the bond to maturity. RA

none June 10, 2019, 8:39 am

Last 2 Fed cut campaigns = 50%+ stock market collapses.

Have a great day Rick,

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