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Treasury Note Yields Christmas Gift to Income Investors


As I begin to pack it up for the Christmas Eve-shortened work day, I wanted to share this graph of the 10-year Treasury Note Yield which is currently yielding just under 3%. Savers have not had a 3% yield on a “risk-free” asset in a very long time [risk free being in the eye of the beholder].

As we enter 2014, this 3% yield will present a different sort of issue for investors in the stock market – with treasuries yielding more than the S&P 500, they present a viable alternative to dividend stocks for the more risk-averse income investors.

With the yield on the 10-year treasury more than double where it was a year ago this time, we will begin to see it impacting stock prices in two ways: 1) as an alternative for income investors, as discussed above, lowering demand for stocks; and 2) as a drag on the earnings of corporations that depend upon debt to finance their operations.

If we cross the 3% level and remain above it, I think we will see some negative impact on stock prices in the first half of 2014, but it will offset by quick action by the Federal Reserve to reverse or halt their tapering activity in order to drive rates down and stock prices back up.

But, there will be a lot of time in 2014 to discuss this and other issues on the blog. For now, I wanted to leave you with one last Christmas video and wish you all a very Merry Christmas and a Happy Holiday if you celebrate another holiday!

Click here to watch today\'s video on YouTube