The 10-Year Treasury Yield Just Hit 5%, and It Creates a Dilemma S&P 500 Investors Haven't Faced in Nearly 20 Years
Should investors lock in a 5% yield for the next decade or take the chance on greater returns from stocks?
Overview
Just five years ago, the Fed Funds rate was 0%. Three-month Treasury bills were yielding 0.05%. Even the 10-year Treasury yield was a meager 1.5%.
Needless to say, the bond market offered very little to income seekers unless you were willing to venture out into risky longer-term junk bonds. Worse yet, yields had almost nowhere to go but up from there, making eventual losses a high likelihood.
Details
Today, the fixed-income environment is different. It took some pain to get there, but bonds offer a legitimate risk/reward consideration when compared to stocks. The 10-year Treasury yield just crossed the 5% threshold for the first time since 2007, meaning investors can lock in a (theoretically) risk-free yield of 5% annually for the next decade.
Source
Originally published at www.fool.com.