Yesterday was the first time since the Spring of 2011, that the yield on 5-year Treasury notes crossed 2%. What’s so special about a 2% yield?
Walter Bagehot of Lombard Street fame, opined many decades ago that “John Bull can stand many things, but he cannot stand two percent.” That may still be true today, but after so many years of being deprived of safe interest income, a 2% yield doesn’t look so bad. If you take the liberty of assuming that Yellen & Co., won’t let the inflation genie out of the bottle, it is once again possible to invest in medium-maturity full-faith-and-credit pledge U.S. Treasury notes without the expectation of losing purchasing power over the life of your investment.
That’s a welcome change for income investors.