To bolster the economy, the Federal Reserve has lowered short-term interest rates 250 basis points (2.5 percentage points) since the beginning of 2001. Thus, investors might have expected long-term interest rates to go down, too.
That hasn’t been the case. Since the beginning of 2001, yields on 10- and 30-year Treasuries have risen. Now, 30-year Treasury bonds yield about two percentage points more than three-month Treasury bills. Single-A-rated corporate bonds are paying around 7%.
For the first time in years, investors are receiving substantial rewards for taking some credit risk. That may be good news for investors who depend on the yields they receive from bonds. The higher yields may bolster returns from bonds while the stock market remains volatile.
