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US bond yields have fallen sharply recently due to falling oil prices. Yardeni believes the 10-year US bond will be attractive if it returns to the 5% level, but stocks may still outperform bonds over the long term.
US Treasury bond prices continue to rise,produce Oil prices fell on Wednesday in line with market expectationsdemocratic party Sweeping victory in midterm elections could increase pressure for early end and de-escalation of Iran’s wartrump The government may further increase its fiscal deficit.
As international oil prices have fallen, the futures price of Brent crude oil has fallen below US$95 per barrel. Falling energy prices have increased European debt and US debt.
U.S. The 10-year Treasury bond yield fell 7.82 basis points on Wednesday and fell further to 4.847% on Thursday. This has fallen sharply from 5.3% in early October.
The 30-year US yield rate also fell to 5.2719%.
So are US Treasuries worth buying? Ed Yardeni, president and chief investment strategist of Yardeni Research, pointed out that if the US Treasury yield is 5%, that is a very attractive level.
“If you ask me now where bond yields will be at the end of this year, the end of next year and the near future, I would say 5%,” Yardeni said in an interview with Bloomberg TV.
He said: “I think interest rates have normalized, and that will last for a long time. 5% is a very normal interest rate level, and it also means the economy is performing quite well.”
“I think bonds become very attractive when yields get to 5%.”
Yardeni said that if you want to buy a 10-year US Treasury bond at a yield of 5%, investors need to have some degree of optimism about productivity growth and believe that productivity growth will reduce inflation, “and I think it actually will.”
He said the inflation rate is expected to be around 2% to 2.5% over a 10-year period. So, if investors can get a real return of 2.5%, that’s actually quite good in the bond market. “Therefore, I think investors will be able to earn bond coupons, and the coupon yield will be higher than the inflation rate.”
However, Yedeniya said that in the long term he believes stocks will continue to outperform bonds.
He expects 10-year US Treasury yields to fluctuate between 4% and 5%, the range seen before the global financial tsunami.
Summary FAQ
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The main reason is that the fall in international oil prices has eased inflation concerns, and market expectations that the midterm election results may affect fiscal and geopolitical risks have led funds to buy European bonds and US bonds, pushing bond prices higher and yields lower.
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He clearly pointed out that if the 10-year US Treasury yield reaches 5%, it will be a very attractive level; He believes that this means that interest rates have returned to normal, and also shows that the economic situation is still not bad and is suitable for long-term allocation.
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Although Yardeni is optimistic about US bond returns with a 5% yield, he still believes stocks can continue to outperform bonds on a long-term scale; He also estimates that 10-year US bond yields will fluctuate between 4% and 5%.
