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February 16, 2005
Fixed Income Wednesday, Feb 16, 2005 07:22:22
The yields on U.S. Treasury debt have risen across the board this week, just as I had forecast in my Week In Review. That is likely to continue today, and may start impacting the global equity markets.
In the past week, the yields have moved from 4.36 to 4.48 (+12bp) on the 30-year; from 4.01 to 4.09 (+8bp) on the 10-year; and 2.38 to 2.44 (+6bp) on the 3-month Treasuries.
The yield spread is starting to slope higher " presently at 204bp from last week's 198bp, which is an indication that investors are looking more favorably at prospects for economic growth. A healthy economy however requires a spread of 300bp on say a three-month average (given that yields are always fluctuating).
I think that rising rates will negatively impact on the fixed income trusts, including REITs, this year. Preferable as an income vehicle this year will be high dividend yielding common stock. Those can be found in the integrated natural resource stocks, including some energy and base metals producers, which I'll write up soon.
Posted by Posted by Bill Cara on February 16, 2005 07:22:36 AM | Category: Bonds