Everyone’s Watching the 10-Year Yield, but This is the Real Rate that Matters

Check out CNBC’s latest article quoting DataTrek’s Nick Colas on the 2-year Treasury yield as an attractive risk-free alternative to stocks. Especially with increasing market volatility:

“As much as every investor knows market timing is very difficult, that’s the sort of case study that resonates just now, Nick Colas, co-founder of DataTrek Research, said in his daily note Wednesday…

…Investors have been testing the waters over the past month, yanking $868 million out of U.S. equity ETFs while pouring $5.2 billion into funds that invest in fixed income with duration of less than three years, Colas said, citing XTF data. The iShares Short Treasury Bond fund, which focuses on fixed income with duration between one and 12 months, alone has pulled in $3.4 billion over the past month, according to FactSet…

…If I offered you a no-fee risk-free contract to deliver a 2.5% annual return on the S&P over the next two years, would you take it? Colas said. On the one hand, it’s well less than the historical market return. But … there’s no risk of drawdowns and at least it’s better than 2% inflation. You might be tempted.”

Read the whole article here on CNBC!