Investors are looking pretty grim of late with investments in stocks and commodities, but not in long-term Treasury bonds. The stocks and commodities have been in a free fall with all three of the indexes down more than 3% lately. One afternoon of trading recorded a plunge of more than 500 points. Long-term Treasury note investments have seen a marked increase with all of these changes.
A brighter outlook has been seen in 10-year Treasuries which are a safe haven for investors in our hazardous investment marketplace. Investors piled into 10 year Treasury notes this week driving the yield down to several new record lows.
An enormous impact is being had on the American economy because of European market woes still in the news every day. Unfortunately many investors remember September 2008 and are afraid September 2011 will be the similar. In fact, one equity chief financial strategist at Morningstar is comparing the situation in Greece to Lehman Brothers. Investors are worried about the market and have good reason to at this time.
Some of the most popular financial stocks have accounted for the downfall of stocks overall as well as confidence in the market. Rumors about Morgan Stanley’s and Citigroup’s exposure to Greek sovereign debt caused their shares to fall by 6.8% and 7.9% respectively. Moody’s also downgraded Bank of America, Wells Fargo and Citigroup which is adding pressure to the sector. Selling started early last week with all of the world markets recording extreme declines.
China has been a pocket of unstoppable strength in the global economy, but has now become a concern. With the second largest economy in the world next to the United States, weak manufacturing data out of China sparked a fear for investors of a slowdown in the country. As an unstoppable strength in the global economy a slowdown in China will cause a drag on growth worldwide and could have potentials reaching the market in America.
In an effort to boost the American economy the Federal Reserve will shift $400 billion from short-term Treasuries to long-term Treasuries. The shifting from short-term Treasuries to long-term Treasuries increased the price on the benchmark 10-year U.S. Treasuries. Shifting to the long-term Treasuries pushed the yield down to a new record low of 1.88%.
The Feds latest economy assessment startled many investors. The central bank has been warning of a slow economic growth for several months which adds to the gloomy market forecast. The dollar also isn’t as strong as investors would like to see. Although the dollar is stronger against the euro and pound, it’s still slightly lower than the yen.
Investing in treasury bonds is a smart idea if you want to have a low-risk investment to balance your investment portfolio.