FYI: It’s only a month into 2015, and the first act for bonds has been another unpredictable, off-script adventure. Defying expectations that this would be the Year of Rising Interest Rates, the yield on the 10-year U.S. Treasury note has limboed down from 2.2 percent to 1.7 percent, the lowest it’s been since May 2013.
That 1.7 percent is a lot better than the 0.4 percent yield on the 10-year German bund, sure. But gloating isn’t an investment strategy, and 1.7 percent is nothing to cheer about. Nor is the 2.3 percent yield for the iShares Core U.S. Aggregate Bond Exchange-Traded Fund (AGG).
Income investors have a smarter option. And no, it doesn’t involve junk. An A-rated 10-year municipal bond has a taxable equivalent yield of about 3.5 percent for investors in the 28 percent federal tax bracket. (That’s single filers with taxable income of at least $189,000 and married couples filing a joint tax return with income topping $230,451.)
Regards,
Ted
http://www.bloomberg.com/news/articles/2015-02-02/how-to-fight-shrinking-bond-yields
