{"id":8104,"date":"2019-07-15T15:55:02","date_gmt":"2019-07-15T15:55:02","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8104"},"modified":"2022-02-26T13:07:15","modified_gmt":"2022-02-26T13:07:15","slug":"global-bond-yields-are-bottoming-out","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/global-bond-yields-are-bottoming-out\/","title":{"rendered":"Global bond yields are bottoming out"},"content":{"rendered":"\n<p>Government bond yields across the globe are in serious decline\n\u2013 and have been for some time now. Investors are paying closer attention to\nyields these days, however, because in many developed countries like Japan,\nGermany, France, and the Netherlands 10-year bond yields have actually turned <em>negative.<sup>1<\/sup> <\/em><\/p>\n\n\n\n<p>The chart below shows the methodical, steady decline of\ngovernment bond yields over the last 20+ years:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-07-13-image-1-of-1-1024x412.png\" alt=\"\" class=\"wp-image-8105\"\/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>2<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>_____________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">Time to Focus on the Fundamentals!<\/a><\/strong><\/p>\n\n\n\n<p>Want to learn more about global bond yields as well as other\nkey economic indicators and how they could impact the economy and your\ninvestments? Download our just-released <strong>July 2019 Stock Market Outlook report.<\/strong><strong> <\/strong><\/p>\n\n\n\n<p>This\n22-page report contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Inside the China tariff war<\/em><\/li><li><em>Why are Zacks strategists (including me) staying\nbullish?<\/em><\/li><li><em>Stock market returns expectations for 2019 <\/em><\/li><li><em>Small-cap and large-cap outlook in 2019<\/em><\/li><li><em>What of cuts in global growth?<\/em><\/li><li><em>What produces 2019 Optimism?&nbsp; <\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you\nhave $500,000 or more to invest and want to learn more about these forecasts,\nclick on the link below to get your free report today!<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released July 2019 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>________________________________________________________________________<\/p>\n\n\n\n<p>So, what does this mean for investors?<\/p>\n\n\n\n<p>First let me state the obvious: if you want to own 10-year\ngovernment bonds in a country where the yield is negative, <em>you have to <strong>pay money<\/strong> to\nloan that government money. <\/em>If that\u2019s a head-scratching proposition, it\nshould be. Even though government bonds of highly developed countries are considered\n\u201crisk-free,\u201d you\u2019d still nominally lose money over a 10-year period (not to\nmention factoring in the purchasing power effects of inflation). &nbsp;<\/p>\n\n\n\n<p>Buying 10-year government bonds in countries where the yield\nis still positive, such as in the U.S., U.K., or Australia, does not do an\ninvestor too much better. Here are the 10-year yields as of close on July 5th:<sup>4\n<\/sup><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>United States: 2.037%<\/li><li>United Kingdom: 0.739%<\/li><li>Australia: 1.293%<\/li><\/ul>\n\n\n\n<p>Not exactly what we\u2019d call \u2018inspiring\u2019 yields, and certainly\nnot what investors would hope to receive in return for locking money up for 10\nyears. <\/p>\n\n\n\n<p>The cause of the decline in global bond yields has a few\nsources, but it\u2019s also difficult to pinpoint exactly where the pressure is\ncoming from. In Germany, for instance, there is a short supply of government\ndebt securities as the country is notoriously frugal and sports a low\ndebt-to-GDP ratio. There are only $1.7 trillion of German government debt\nsecurities, compared to $16 trillion for the U.S. When demand for German\n\u2018bunds\u2019 drives up prices, yields fall. <\/p>\n\n\n\n<p>But the biggest factor in declining bond yields, I would\nargue, is low inflation expectations tied to the \u201cmuddle-through\u201d GDP growth\nwe\u2019ve come to expect from the global economy in this expansion. Central banks\nacross the world have set a low bar for interest rates and the consensus is\nthat easy monetary policy will remain the status quo for 2019. I do not expect\na breakout for rates any time soon as a result. <\/p>\n\n\n\n<p>For consumers, lower rates can be a plus \u2013 the average\n30-year mortgage rate dipped from 5% in November to around 3.8% as of last\nweek, according to data from Freddie Mac.<sup>5<\/sup> <\/p>\n\n\n\n<p>But for investors, paltry yields on risk-free debt can\npresent challenges. Many retirees bank on Treasuries and government debt as\nsafe sources for yield, which in turn can provide steady retirement income and\ncash flow in an investment portfolio. But securing a yield lower than 2% over\n10 years is not many retirees\u2019 idea of a good investment. And it probably\nshouldn\u2019t be. <\/p>\n\n\n\n<p><strong>Where Can Investors\nTurn to Find Yield in a Low-Interest Rate Environment?<\/strong><\/p>\n\n\n\n<p>Government bonds are not the only fixed income options in the\nmarketplace. Here at Zacks Investment Management, we look to high grade\ncorporate bonds and municipal bonds as other areas where we can diversify away\nfrom Treasuries, in an effort to create yield and cash flow in a strategy. <\/p>\n\n\n\n<p>But investors should also remember that stocks can be a good\nsource of cash flow, too. For one, many high-quality dividend stocks often pay\nyields exceeding 2%, and an investor could explore a dividend stock strategy\nthat generates yield in excess of the 10- or even the 30-year U.S. Treasury. Of\ncourse, investing in stocks means enduring the volatility associated with\nequity investing, but for investors with a long time horizon or a higher risk\ntolerance \u2013 or both \u2013 dividend stocks can potentially be a useful alternative\nfor yield. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>In an investment marketplace starved of risk-free yield, it\ncan be challenging for income-seeking investors to find reliable sources of\ncash flow. But it\u2019s not impossible. Investors can explore higher yield\nalternatives in the form of high-grade corporate bonds, municipals, or even\ndividend-paying stocks. We diversify across all of those categories at Zacks\nInvestment Management, and would be happy to discuss them further with you. <\/p>\n\n\n\n<p>In the meantime, to help you learn more about global bonds as well as other key indicators that could impact the economy, I invite you to <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">download our Just-Released July 2019 Stock Market Outlook Report.<\/a><\/strong><br> <br> This Special Report is packed with our newly revised predictions for 2019. For example, you&#8217;ll discover Zacks\u2019 view on:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Inside the China tariff war<\/em><\/li><li><em>Why are Zacks strategists (including me) staying\nbullish?<\/em><\/li><li><em>Stock market returns expectations for 2019 <\/em><\/li><li><em>Small-cap and large-cap outlook in 2019<\/em><\/li><li><em>What of cuts in global growth?<\/em><\/li><li><em>What produces 2019 Optimism?&nbsp; <\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, learn how you may be able to prepare your portfolio for changes in the economy by reading this new report today.<em><br> <br> <\/em><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">FREE Download \u2013 Zacks&#8217; July 2019 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\">6<\/a><\/sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_7_15&amp;content=stock_market_outlook_report\"> <\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Why government bond yields are so low\u2014and where investors may find higher returns <\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71,1],"tags":[],"class_list":["post-8104","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8104","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8104"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8104\/revisions"}],"predecessor-version":[{"id":10739,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8104\/revisions\/10739"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}