Rising Treasury Yields Are Wreaking Havoc on the Bond Market. Here's How It Could Affect Stock Investors.
Income-seeking investors suddenly have another choice that simply didn't exist a decade ago, making some income stocks measurably less attractive.
Overview
Anyone who's been patiently waiting to step into new income investment is loving life right now. The recent rise in interest rates is not only pushing bond yields higher, but nudging yields on dividend stocks upward as well. Indeed, interest yields on super-safe 30-year Treasuries are now at a nineteen-year high of 5.35%, giving even the biggest fans of dividend stocks something else to consider.
There's a downside to this dynamic for anyone who already owned bonds and other debt-based, fixed-income instruments, however. That is, to raise the effective yield on their fixed-income holdings, the market has effectively lowered the value of these bonds. For perspective, the average 30-year Treasury has lost about 5% of its market value over just the past year. That's not a catastrophic setback for a stock. But, for bonds that usually don't experience much price fluctuation, that's a nerve-wracking degree of volatility. Some investors are bailing out in case things get worse. Other would-be bond buyers are waiting on the sidelines. There's even an impact on stock prices themselves.
Details
Here's what you need to know.
Source
Originally published at www.fool.com.