Why You Should Pounce On 2.57% Yields

June 10, 2019

Stocks took another bold leap Friday, heedless of payroll data that suggest U.S. employers pulled back on hiring in May across all sectors of the economy. Their clear concern is a global slowdown in China and Europe that appears to be deepening. Copper and crude oil quotes have signaled this as well with a 12% fall in the former and a 20% plunge in the latter. So has the Ten-Year Note, which is close to slipping below 2% for the first time in more than two years.

Despite this, Wall Street was its blithely exuberant old self on Friday, closing out the best week in months. The Dow tacked on 263 points, bringing the five-day gain to 1142 points. Not bad. But not good, either, since it was just reflex reaction to talk of Fed stimulus that can hardly be expected to prop up the economy while our major trading partners go down the tubes.

A Capital Gains Kicker

Are investors perhaps counting on U.S. stocks to attract increasing sums of safe-haven capital as the global economic picture darkens? If so, this promises to be a great bet until the day it isn't. Our advice is to lock in 2.57% returns on the 30-Year Bond while you can, since that rate could look pretty juicy when flight-to-safety money from around the world eventually panics into T-bonds, as it inevitably will. Were you aware that T-bond holders can rack up annualized gains of 20% or more when long-term yields fall hard? That's not bad just for playing it safe. 

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Dollar falls on uncertainty but ends week with modest gain