The 30-Year Treasury Yield Just Touched 5.33%, a 19-Year High. Here's What History Says About the Last Time Long Rates Sat Above 5%.
A 5% long bond feels like a warning to stock investors. The record from the last time rates lived up here says something different.
Overview
The 30-year U.S. Treasury yield topped 5.33% on Tuesday, Aug. 18, a level last seen in June 2007. It has eased a bit since, sitting near 5.3% as of this writing. But the long bond has now paid at least 5% since early July, pushed there by a swelling federal deficit and inflation that has stayed stubbornly above 2%.
For stock investors, a number like that carries an implied threat. When what is arguably the safest long-term asset in the world pays 5%, the earnings a stock will deliver years from now are -- in a way -- worth less today since every valuation built on those uncertain, faraway earnings has to compete with the bond.
Details
So it's worth knowing what U.S. stocks did during the long stretches when the 30-year paid more than 5%. The record covers almost three decades. And it isn't the one that threat implies.
Source
Originally published at www.fool.com.