Mark on Markets
Last week we began a discussion about the importance of Treasury Bonds within the United States economy. We could make the next 20 articles about this topic, and it wouldn’t scratch the surface of how important debt is to the health of our economy. To recap, the bond terms that we, as watchful investors, keep a close eye on are the 2-year, 5-year, 10-year, & 30-year. Each of these terms carry an interest rate or “yield”, as it is called. As of this writing, the current yields on our favorite bonds are 1.86%-2yr, 2.10%-5yr, 2.14%-10yr, 2.47%-30yr. As you can see, these interest rates are historically low, well below the long-term prime rate of 5%. These yields represent the cost of borrowing for financing something in the short-term (2 years) all the way out to long-term home purchases (30 years). These Treasury rates serve as “benchmarks” for banks and financial institution to borrow at before re-lending to the private and commercial borrowers at a higher interest rate depending on credit worthiness, risk, opportunity, and several other factors.