US Bonds Doing Well in Wake of Economic Troubles
July 12, 2008 · Print This Article
US Treasury bonds are going up in price, even as high oil prices wreak havoc on the US economy, and even as that economy experiences rising levels of unemployment.
As of earlier this afternoon, the 10-year US Treasury note yields an interest of 3.92% of its value. Yesterday, the 10-year treasury note yielded an interest rate of 4.04%. It has gained 31/32, such that its value is now 99 21/32.
Meanwhile, the 30-year bond went up to 95 27/32, having increased by 1 19/32. Its yield in interest is now 4.63%, lower than yesterday’s 4.74% but still quite high. As for the 2-year treasury note, its value went up by 8/32, for a total of 100 15/32. Its yield in interest is 2.38%; yesterday, the 2-year note yielded 2.5% in interest.
The reason for this rise in the value of US treasury bonds is that Americans are looking for lower-risk investments, guaranteed to yield profits even in the midst of today’s unstable economic conditions. The rate of unemployment went up to 5.5% in May, an increase of .5% since April. This is the highest rate of increase over the course of one month since 1986. At the same time, the price of oil went up to $137.70 per barrel on the NYSE, slowing down the US economy as companies’ expenses mount and profits shrink.
As always, when signs of economic stress appear, Americans look to more stable investments, such as US treasury bonds. In this situation, one possible problem with the treasury bonds is inflation. As the dollar depreciates in value, the rate of inflation grows. No matter how high a yield the US treasury bonds have, inflation lowers the value that those who buy treasury bonds are ultimately getting.
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