Market Overview

U.S. Treasury Yields Surge


The U.S. Treasury Bonds rise to its highest level weekly in a decade with high yield currencies. The current U.S. Bond surge is due to a stronger economy. With  markets adjusting and economic volatility, investors choose bonds as a safer option which offers more security.  The Federal Reserve raised concerns and comments with investors speculations on easing QE3. U.S. stocks ended higher with ten-year U.S. treasuries yields rising above 2.50 percent, its highest intraday level since August 2011.


The dollar continues to rise due to the positive economic forecast. The dollar rose 0.5 percent with a weekly gain of 2 percent, the highest since early July, 2012. The euro fell 0.7 percent to $1.3126 and the dollar gained 0.4 percent against the yen to 97.70 yen. The 10-year Treasury Bonds were down to yield 2.54 percent, while 30-year bonds dropped to yield 3.59 percent.

The Federal Reserve is working to reduce the jobless rate of 7.6 percent after four years of economic growth. According to Bloomberg, “The economy will grow 1.9 percent in 2013 and 2.7 percent in 2014, the economy has not grown more than 3 percent over the course of 12 months since the four quarters ending in June 2006.“ The U.S. stock indexes had ended their worst week since April. The S&P 500 remained below its 50-day moving average last Thursday.


Stocks and Treasuries fell Tuesday as Federal Reserve Chairman Ben Bernanke stated “The central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy finally achieves the sustainable growth the Fed has sought since the recession ended in 2009.” The Standard & Poor’s 500 Index declined 1.4 percent to 1,628.93. The yield on the 10-year Treasury note jumped to 2.36 percent, the highest since March 2012, from 2.19 percent last Tuesday. Investors are still uncertain of The Fed’s policy and plans.


If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year.” Bernanke said. “If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Bernanke said in a press conference in Washington.


The 30-year US Treasury Bond auction sold at 3.335% vs 3.325%. The Federal Reserve is currently buying $85 billion a month in bonds causing even more risk while sending U.S. stocks up about 15 percent year to date.  MSCI's stock index missed at 0.3 percent and the FTSE Eurofirst 300 index ended down 1 percent. The Dow Jones industrial average added 41.08 points, or 0.28 percent, to 14,799.40. The Standard & Poor's 500 Index rose 4.24 points, or 0.27 percent, to 1,592.43. The Nasdaq Composite Index was off 7.39 points, or 0.22 percent, to 3,357.25.


Investors should recognize the importance of maturity in high yield treasury bonds. There are yields for two, five and ten-year terms. The highs, lows and long-term averages are based on “constant maturity” methods employed by the U.S. Treasury. The bonds can be combined with coupon payments and maturities that match investors income criteria. High yield treasury bonds are investments with guaranteed returns. The yield to maturity is significant to determining actual yield received by the investor. The income that is earned from these type of bonds are a risk-free yield, exempt from state and local taxes. Long-term bonds are a safer option compared to stocks. An effective strategy is to leverage both stocks and treasury bonds in an investment portfolio to minimize risk and reward.


The U.S. economy is meeting expectations as economic conditions are getting stronger. Investors that are dependent on income to allocate toward their expenses should be investing in the high yield treasury bonds. High yield treasury bonds are important for diversification in investor portfolios, reducing volatility and increasing predictability of returns. Investing in high yield treasury bonds should be a long-term investment strategy.


The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Bonds Markets Trading Ideas


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