U.S. 30-Year Bonds Outperform Stocks in 2014 Before Sale Today

(Bloomberg) -- Treasury 30-year bonds have returned more than double that of U.S. stocks this year before the government’s monthly sale of its longest maturity today.

Long bonds advanced 16% in 2014 through yesterday, based on Bank of America Merrill Lynch data. The Standard & Poor’s 500 Index gained 6.7% including reinvested dividends, according to data compiled by Bloomberg. Demand rose at a sale of 10-year notes yesterday. Unrest in Ukraine and Gaza combined with uneven U.S. economic growth are driving demand for the relative safety of government debt.

“As we have progressed through the year, a lot of flattening trades have been put on in anticipation” of the Federal Reserve raising interest rates sooner than investors expected, said Marc Ostwald, a strategist at ADM Investor Services International Ltd. in London. Longer-dated bonds have “also benefited from a combination of trades out of riskier bond classes and flight to safety.” A flattening trade is a bet longer-dated yields will fall faster than those on securities with shorter maturities.

U.S. 30-year yields were little changed at 3.24% at 7:05 a.m. in New York, according to Bloomberg Bond Trader data. The price of the 3.375% bond due in May 2044 was 102 18/32. Ten-year notes yielded 2.42%.

Thirty-year yields will rise to 3.5% by year-end and 10-year rates will reach 2.7% as long as there is no derailment of the U.S. recovery, ADM’s Ostwald said.

Get access to this article and thousands more...

All Financial Planning articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.

Already Registered?

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Already a subscriber? Log in here