The 10-Year Treasury note recently pierced below the all-important psychological 2% level (1.97%), which has confounded many investors, especially if you consider these same rates were around 4% before the latest mega-financial crisis hit the globe.
Experts expected bonds would begin declining this fall in anticipation of the Fed beginning to raise interest rates, its next step toward normalizing monetary policy. Instead, U.S. bonds have continued to rally as a global safe haven.
With bonds offering lower and lower yield possibilities, there are still plenty of opportunities in stocks, especially in high dividend-paying equity investments. Outside of the U.S., many global equity markets are offering significantly higher yields than bonds.
U.S. Treasury bonds have become seriously overbought and overextended above their long-term 200-day moving average. In addition, the Fed is expected to begin raising interest rates, possibly as early as June, which would be a negative for bonds.
It was expected that the Fed’s tapering back of QE bond purchases would be a big negative for bonds once it began. Instead, bonds have been in a rally since the Fed began that tapering process.
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