Trump’s win brings good news for savers
The U.S. election results are producing opportunities for retirees and other savers — as long as they have some money set aside.
The rate on 10-year Treasury notes BX: TMUBMUSD10Y has leapt toward last year’s highs in the wake of Tuesday’s result, which has put the Republican Party in control of the White House and the Senate and may also leave it in control of the House of Representatives. The interest rates on inflation-protected U.S. government bonds are nearing the highest levels seen since the global financial crisis in 2008.
In fact, 10-year Treasury yields of nearly 4.7%, and long-term inflation-protected yields of nearly 2.3%, represent appealing low-risk savings opportunities for those looking for security and income rather than the volatile growth that comes from stocks.
Savers can buy these bonds directly at many brokerage firms, or they can buy a basket of bonds through mutual funds or exchange-traded funds.
A big risk is that these interest rates could keep rising. But they are already a dramatic improvement from where they were before the polls closed on Election Day, and from the lows seen in September.
The interest rate on the 10-year Treasury note jumped by 0.2 percentage points to 4.44% on news of the “red wave” election. The rate on inflation-protected TIPS bonds rose as high as 2.25% on long-term bonds, a four-month high.
Long-term interest rates rose as the market digested the budgetary and economic implications of the election sweep.
“For a Treasury market that was already reeling, Trump’s victory has put additional pressure on rates, as evidenced by the historic move higher in Treasury yields as the Trump victory became clearer overnight,” Lawrence Gillum, chief fixed-income strategist for LPL Financial, said in a note to clients.
“Treasurys began to sharply bear steepen on a Trump victory as markets pencil in higher deficits and inflation,” the strategy team at TD Securities reported. “A Red Wave is likely to bring a wholesale renewal of the [2017] tax cuts and some additional tax cuts. This amounts to additional deficits of approximately $5 [trillion] over the coming decade relative to the current Congressional Budget Office (CBO) baseline.”
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