International Investors Continue to be Attracted by US Yield Levels
US yield levels and interest rates reached record lows this week (below 1.4% on the benchmark 10-year US Treasury bond).
However, the headline on the chart below sums up an interesting point: as other markets see such low rates, they make US interest rates look attractive by comparison to international investors. The chart, taken from Deutsche Bank Economics, shows that three key economies — Switzerland, Japan, and Germany — have their interest rate structure mostly below zero all the way out to 10 years (i.e. short and intermediate government bonds), with the red on the chart indicating ‘negative’ interest rates. The Brexit has reinforced these trends, creating a decline in UK interest rates and increased uncertainty in Europe due to this outcome.
Our recent blog, “Income in a Low Interest Rate World” discussed some ideas for investing in this low interest rate environment.