It’s official. You can lock up your money for a decade and, if inflation remains the same at just under 2%, you’ll lose purchasing power in the process.
Stock prices and bond yields fell on Monday as investors worried about tensions in Hong Kong, the trade wars, and a possible global recession.
The biggest changes were in the bond market where the 10-year Treasury bond yield dipped to 1.64%, less than inflation at 1.9%, and the 30-year Treasury bond yield fell to the lowest level since July 2016.
The difference between the yield on 2-year and 10-year bonds was just 5.3 basis points.
Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee, said:
“We’re back to worrying that things are still unsettled and so there’s no need to push stocks higher, and without that optimism, without that ‘things-are-getting-better’ impulse behind stocks, Treasury yields are moving to the lower middle of the range.”
Since the beginning of the year, 10-year yields have fallen more than a hundred basis points, on track for its steepest drop in eight years.