A Steeper Curve?
The Yield Curve Remains Inverted, Albeit Less So Than Before. An Economist Says There Are Signs Of a Shift.
Tiffany Wilding of Pimco
The yield curve has been inverted for several years now. In other words, yields are higher at the front end of the curve than at the back end. The 2-Year U.S. Treasury Note was recently at 4.5%, compared with about 4.2% for the 10-Year Note. Under more normal circumstances, investors get more yield further out the curve to be compensated for the risks of holding those securities for longer time periods.
Income Matters Today spoke recently spoke with Tiffany Wilding, economist at asset manager Pimco, for some insights about the yield curve. She expects it to steepen, partly owing to an impending rate cut by the Federal Reserve. Lately, cash has been king, thanks to very attractive yields. But as Wilding points out, there is reinvestment risk for staying in cash, especially when yields further out the curve start to pick up and cash loses some of its luster. All of this, of course, has plenty of implications for income investors — a key one being how to allocate their assets in fixed-income markets. A link to our discussion is below.
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