Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 

  The Real Rate of Return on the 10-Year Treasury Note is back to Zero
Posted Under: Bond Market
Supporting Image for Blog Post

 
View from the Observation Deck  
  1. The real rate of return on a bond is calculated by subtracting the most recent inflation rate, such as the Consumer Price Index (CPI), from the bond's current yield. The higher the real rate the better. 
  2. As of the close of 6/29/18, the yield on the benchmark 10-year T-note was 2.86% (2.9% rounded), which matched the 2.9% year-over-year (YoY) rate on the CPI in June 2018. That equates to a real rate of 0.0%. 
  3. The CPI YoY rate rose significantly, from 2.1% to 2.9%, in the first half of 2018. For comparative purposes, from 1926 through June 2018, the CPI YoY rate averaged 3.0%, according to Bloomberg.  
  4. Including the initial rate hike on 12/16/15, the Federal Reserve has raised its federal funds target rate (upper bound) seven times, from 0.25% to 2.00%, or an increase of 175 basis points (bps). Over that same period, the yield on the 10-year T-note rose just 56 bps, according to Bloomberg. 
  5. With inflation on the rise, we believe bond investors are likely going to have make a judgement call relatively soon as to whether, or not, they believe that U.S. economic growth will accelerate in the coming months. After all, that was one of the primary goals behind the drafting of the Tax Cuts and Jobs Act (December 2017).  
  6. The chart and performance data referenced are for illustrative purposes only and not indicative of any actual investment. 

Download a PDF of this post, please click here.
Posted on Tuesday, July 17, 2018 @ 2:46 PM • Post Link Share: 
Print this post Printer Friendly

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.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
•Market Commentary Video
•Weekly Market Commentary
•Weekly Market Watch
•Monthly Talking Points
•Quarterly Newsletter
•Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
• US Stock Markets Ended July 13, 2018
• US Economy and Credit Markets Ended July 13, 2018
• A Snapshot of Market Breadth via Performance
• How The S&P 500 Index Has Performed Since The Federal Reserve Began Hiking Interest Rates On 12/16/15
• 18 out of 20 ... So Far!
• US Stock Markets Ended July 6, 2018
• US Economy and Credit Markets Ended July 6, 2018
• Corporate Earnings Estimates Reflect Strength
• US Stock Markets Ended June 29, 2018
• US Economy and Credit Markets Ended June 29, 2018
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2023 All rights reserved.