Long-term investors with income on their mind have essentially been unaffected by the Federal Reserve raising interest rates two years in a row, according to Bloomberg columnist Chet Currier.
Investors of bond mutual funds and other long-term investments were hard pressed to find yields that met their needs before the Fed started to raise short-term rates from historic lows in mid-2004. Now, investors are still faced with the same problem as the Fed's target rate for overnight loans between banks has risen 1 % to 5.25%.
There is not much of a difference in the yield curve depicting income returns on U.S. securities across a range of maturities from two to 30 years. A 10-year commitment, instead of a two-year, will get an investor an extra two basis points.
The Fed raised overnight interest rates by 425 basis points, but the 10-year notes' yield increased by only about one-tenth as much. As the U.S. economy showed signs of waning a bit in the past few weeks, bond yields have declined a little. "The peak in rates for this cycle, and this cycle only, came on Friday, May 12," said Dan Fuss, vice chairman and bond fund manager at Boston-based Loomis Sayles & Co.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.