Now that the US 10-year treasury yield is holding above 4%, making me want to put more money into it. But, after a series of studies, I have some conclusions in mind:
- US long-term treasury yields are at about 20 years high. Technically, now is the time to buy.
- The US core PCE is still above 4% and the yield curve is badly inverted. If the Fed hikes more rates and the long-term yields rise to achieve a normal yield curve, the long-term bonds could be very risky.
Today, I want to say something good about the US long-term treasury bonds that long-term treasury bonds have a higher chance of beating the short-term ones if held long according to their historical returns.
The followings are the target researching ETF:
- TLT, iShares 20+ Year Treasury Bond ETF.
- IEF, iShares 7-10 Year Treasury Bond ETF.
- IEI, iShares 3-7 Year Treasury Bond ETF.
TLT VS IEF
Investing for 1 year
Investing for 5 years
Investing for 10 years
Investing for 1 year
Investing for 5 years
Investing for 10 years
Investing when the yield curve is inverted
2019/6/7-2020/6/8
It took the yield curve about 1 year to become normal.
2007/3/23-2008/3/20
It took the yield curve about 1 year to become normal.
During rate hikes
2022/3/5
2015/11/30-2019/1/14
2004/6/7-2006/7/31
Conclusion
Under a normal yield curve situation, the long-term yield is higher than the shorter ones. It makes sense that if holding long-term bonds with higher yields until maturity, the returns are higher.
The previous 2 times when the yield curves were inverted were in 2007 and 2019 and they were resolved when the Fed cut rates not when the long-term yields rise to catch the shorter ones.
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