Chart of the Day: 3-Month Treasury Yield Surpasses S&P 500 Yield

For the first time in a decade, the yield on three-month treasuries exceeds that of S&P 500 dividends.

The above chart is from the Financial Times article Authers’ Note: Hunting for yields is getting easier.

John Authers also notes the "Dividend Aristocrats" of the S&P 500 — the stocks with the highest and most reliable dividend yields — are finding that they now have competition from 2-year Treasury bonds.

Authers makes a number of interesting points.

  1. The Beige Book features far more references to inflation than it did when inflation was last persistently above the Fed's target.
  2. The intensity of references to inflation on the Google search engine is moving up.
  3. Net share buybacks have been negligible. It looks like the bulk of last quarter’s repurchases went on stock options.

It's increasingly easy to stick with my prognosis: Inflation is in the Rear-View Mirror.

The Nearly Unanimous Opinion: Inflation Has Arrived, reinforced today, adds to my conviction.

Mike "Mish" Shedlcok

Comments
Realist
Realist

Bam Man, I more or less agree with your ideas, though I believe 2018 will see rates rise and they won’t reverse course till sometime in 2019.

Realist
Realist

Most well-run pensions throughout the world are very diversified and invest for the long run (think 75 years). In addition to equities and bonds, they also invest in real estate, infrastructure, mines, farmland, forests, etc. etc. They also often have Private Equity divisions that buy entire companies. Having said that, they do rely on interest rates and inflation rates to project their long-run viability (again, over 75 years or more). I understand that many on this site are not aware of the actuarial math that is required to fully understand how large pension funds work. I also understand that many US pension funds appear to be poorly run, underfunded, and over-optimistic in their long-term projections.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

"The mere fact the author thinks rates will continue down when so many pensions are grossly unfunded is laughable."

That statement is laughable. Pension plans are heavily in equities. They also have 7% or more plan assumptions. 3% or even 5% will not do it. And equities will get smashed. Please think!

AWC
AWC

Rates will ultimately rise to meet the overall rate of devaluation of the currency.

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