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  A Global Snapshot of Government Bond Yields
Posted Under: Bond Market

View from the Observation Deck  

  1. Today's blog post shows the yields on a couple of benchmark government bond maturities from key countries/economies around the globe.
  2. We highlight where yields have trended since the U.S. 10-year Treasury note (T-note) hit its all-time closing low of 1.36% on 7/8/16, according to data from Bloomberg.
  3. The 188-basis point (bps) increase in the yield on the 10-year T-note from 7/8/16 through 11/7/18 negatively impacted the performance of intermediate-term government bonds. 
  4. The ICE BofAML 7-10 Year U.S. Treasury Index posted a total return of -7.82% (-12.95% price return vs. 5.13% income return) over that period, according to Bloomberg. For comparative purposes, the ICE BofAML 1-3 Year U.S. Treasury Index posted a total return of 0.28% (-3.88% price return vs. 4.15% income return) over the period. 
  5. As indicated in the table, with one exception (Mexico), U.S. government bond yields have risen the most since the 10-year T-note bottomed on 7/8/16. 
  6. Investors need to be cognizant of the fact that interest rates are still at low levels relative to their historical averages. Even though the yield on the 10-year T-note is up 188 bps from its all-time low, at 3.24% (11/7/18), it is still 150 bps below its average yield of 4.74% over the past 30 years, according to Bloomberg.
  7. Bond investors have not had to cope with rising inflation for many years, in our opinion. The International Monetary Fund (IMF), however, sees inflation in "Advanced Economies" advancing at a rate of 1.8% in 2018 and 2019, up from 1.4% in 2017. It sees inflation in "Emerging Market and Developing Economies" rising from 4.3% in 2017 to 5.0% in 2018 and 5.2% in 2019. 

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. There can be no assurance that any of the projections cited will occur. The ICE BofAML 7-10 Year U.S. Treasury Index and the ICE BofAML 1-3 Year U.S. Treasury Index track the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government in its domestic market.  

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Posted on Thursday, November 8, 2018 @ 1:23 PM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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