Dian's Column
Dian's Archive


Interest rates creeping up on the long end--not so on the short

By Dian Vujovich

For quite a while, cash investors have been complaining about the piddley returns they’ve seen on short-maturing Certificates of Deposit and in money market funds. Keeping cash in a can under the bed may have returned more if quick and easy access to your money is something you value.

But. things in the world of interest rates are beginning to change. Just not everywhere.

Look at the daily Treasury yield curve rate published by the U.S. Department of the Treasury (http://tinyurl.com/24zfpud) and you’ll notice that while long rates are creeping upwards, the really short rates are getting lower.

For example, on the first of December, the daily Treasury yield showed 1- month yields to be 0.17 percent; the 1-year yield at 0.28 percent; the 10-year at 2.97 percent; 20-year at 3.95 percent; and 30-year at 4.24 percent.

Two weeks later, on December 16, that 1-month yield had dropped 50 percent to 0.08 percent while all others moved up. For instance, the 1-year, was now 0.31 percent; the 10-year, 3.47 percent; the 20-year, 4.32 percent; and the 30-year up to 4.57 percent.

That hike on the long-end and has, among other things, translated to higher mortgage rates for those wanting to purchase a home. And on the short-end, well, just the opposite. Not hot for fans of cash.

Yields on munis are puny too, but none-the-less more attractive.

In a market snapshot from Zions Direct , 9-month AAA-rate munis had an average yield of .052 percent; 1-year, 0.75 percent; 7-year, 2.36 percent; and 10-year, 3.14 percent.

Lower quality BBB-rated munis had yields of 1.10 percent on short 9-month bonds; 4.79 percent on those maturing seven years from now; and almost 5 percent (4.99 percent) on 10-year munis.

If you’re looking for income– relatively safe, steady, income— dividend-paying stocks from good companies that have a long history of paying dividends, plenty of cash and make popular products continue to be the first logical place to look.

To read more articles, please visit the column archive.

[ top ]