- Despite the 10-year U.S. Treasury yield gathering some upward momentum this week, March’s steep monthly decline punctuated the trend of sustained low rates that has been in place for the past decade. During that time, the 10-year has traded within a broad range of 2%–3.5%, with brief outliers both above and below.1
- Today, the 10-year yield is just 2.50%, approximately 15 bps below where it was 10 years ago.1 As the chart shows, the Fed’s nine rate hikes since December 2015 have had little effect on long-term rates – with 10-year yields sitting just 23 bps above the levels at year-end 2015.1
- Investor sentiment shifted rapidly this year. Heading into 2019, markets were pricing in further rate hikes. Following the Fed meeting in March and several statements from policymakers, expectations have reversed, with markets pricing in a rate cut later this year.2 This change comes as the amount of negative-yielding debt around the world is approaching $10 trillion once again, a level last seen in Q4 2015.2
- With interest rates hovering at such persistently low levels through the past decade and with little expectation for any increase in short-term rates, investors could continue to face difficulties generating income within their traditional fixed income allocations.
1 U.S. Federal Reserve Bank of St. Louis, https://bit.ly/29ecBfp.
2 Bloomberg, as of April 5, 2019.
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