More Income on Safe Money Short Term Investments

Interest rates on short-term investments quietly claimed the last few weeks, without any action by the Federal Reserve. The increases likely result from a combination of the new tax law and recent economic data. Whatever the cause, as these charts show, you can now earn income that looks generous (by recent standards) on safe treasury debt. Most treasury debt now yields more than the S&P 500.

For the better part of the decade, extremely low yields on “risk-free” Treasuries made “riskier” asset classes like equities more attractive. That attractiveness is finally beginning to fade as Treasury yields across the curve tick higher. As shown in the two charts below, at this point the yields on the 10-Year, 5-Year, AND 2-Year Treasury Notes are above the dividend yield of the S&P 500. Only the 3-Month T-Bill yields less than the S&P 500’s dividend yield at this point. The last time the 10, 5, and 2-Year Treasury yields were all higher than the dividend yield of the S&P 500 was ten years ago back in mid-2008.