The global economy is within a razor’s edge of its next leg down…
The U.S. 10-year Treasury note is now just above its all-time low yield. At the time of this writing, the 10-year note yields 1.4610%. In July 2012, the 10-year closed at 1.404%.
A breakdown below the 2012 level will send yields into unprecedented lows… and no one knows just how far they could drop from there.
Remember, over $11 trillion in global Treasuries now sport negative interest rates. That means bondholders must pay for the privilege of lending money to these governments.
It’s absurd. And it’s helping drive U.S. yields even lower…
After Friday’s Brexit referendum (where the U.K. voted to leave the European Union), frightened global investors have piled into U.S. 10-year notes. U.S. yields may be low, but they’re not negative (yet) like much of the rest of the world. That’s attracted a lot of buyers.
[As bond demand (and thereby price) goes up, bond yields go down.]
At the same time, May’s abysmal jobs report has all but ensured the Federal Reserve’s interest rate-hiking “cycle” (one hike of 0.25% in December 2015) is over. That’s put another tail wind behind the move to lower yields ahead.
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The latest Treasury news won’t come as a shock to longtime Daily readers. They know the squeeze in yields is due to a seismic shift in the global currency markets. It’s larger and more powerful than “Brexit” or the Federal Reserve’s interest rate policy.
Tom calls this phenomenon “The Great Unwinding.” Here’s what he wrote back in the February issue of The Palm Beach Letter:
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I consider myself an expert on income investing, and I’ve studied just about every type of income investment in existence. Income investing is in a massive bubble as a great cohort of baby boomers retires and seeks income to replace lost income from work. Never before has there been such a massive global “search” for yield. High-yield investing is going to be ground zero of The Great Unwinding, just as it was in 2008. Ironically, safe income will be one of the best-performing assets. What’s safe? Anything investors can trust will not default, no matter what (like U.S. Treasuries). It won’t be a large sample size. |
Tom recommended his readers invest in an exchange-traded fund (ETF) that tracks the action of U.S. Treasuries. Subscribers who took his advice are up 16.66%… while earning a 2.5% yield.
Now Tom’s co-editor, Teeka Tiwari, has found a powerful new way to play the trend of falling yields. It’s a rare, paradoxical investment vehicle that increases its yield as interest rates go down. And it’s safe.
Here’s what Teeka just wrote in June’s Palm Beach Letter:
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At the time of this writing, this security’s yield stands at 10.77%. That’s almost six times greater than what 10-year bonds are paying. Let me put it in perspective for you… Imagine you have $10,000 in a 10-year Treasury bond. At current rates, you’d earn only $184 in annual interest payments. That’s a pittance if you are a retiree looking for stable income. Now, compare that to this month’s recommendation. That same $10,000 would yield $1,077 in dividends at the end of the year. Its payout is a mind-blowing 485% greater than Treasuries. That’s a big boost for a retiree on a fixed income or looking to save some extra money. |
Bottom line: Watch the 10-year rate like a hawk. If it breaks below its all-time low, expect even lower yields ahead worldwide… as now even U.S. Treasuries slide down toward negative rates…
If you need safe income today, Teeka’s recommendation offers a rare double-digit yield that increases as the world descends deeper into the negative interest rate abyss. You’ll be hard-pressed to find a similar yield as safe today.
All Palm Beach Letter subscribers can click here to review Teeka’s recommendation. Others can gain instant access (with no long video) right here.