The Quiet Fall in Bond Yields

With all the attention given to inflation, stock prices, and job reports, it’s been easy to overlook the remarkable move in the bond market during the past few months.

The yield on the 10-year treasury closed at 1.37% on Friday, July 9, down from its 2021 high of 1.74% in late March.¹

What’s behind the quiet fall in bond yields?

One explanation may be that reopening sentiment has turned a bit more cautious as the Delta variant of COVID-19 spreads globally. Another view is that overseas investors are buying Treasuries, effectively lowering yields.^2,3

Still another school of thought says it's due to declining inflation concerns. Or maybe it's simply more money finding its way into bonds.²

Whatever the cause, the yield narrative has changed from just a few months ago when market pundits believed that the 10-year treasury was heading to 2%.¹

This also explains mortgage rates moving down to extremely low levels.

Will yields keep trending lower or will they do an about face and move higher? A better question to ask yourself is, “does my investment strategy fit my goals, time horizon and risk appetite?” Challenge yourself to tune out the market noise and focus on what matters to you. And be sure to give us a call to discuss any concerns or questions you may have. Call: (562) 433-1400

^{1. U.S. Department of Treasury, July 12, 2021}

^{2. CNBC.com, July 8, 2021}

^{3. The Wall Street Journal, June 11, 2021}

^{The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk.}