Sep 28 2011
US Treasury Yields
More and more people are trying to track the economy and watching how the treasury yields would advance in the future. Although the topic may be fairly complicated, learning about US treasuries is actually very important in plotting future investments.
With the right knowledge, a person may be able to increase their assets and ensure that their financial future would remain strong despite economic downturn.
According to forecasts, the future for the US treasuries and its growth is less than stellar. Simply put, this means that the yield of treasuries are not improving or worse decreasing in value. This is also known as an “Inverted Yield Curve” and is used as a factor in determining a country’s economic position in the future. In fact, an Inverted Yield Curve has actually been attached to a downturn in the economy. Statistics show that this type of Yield Chart is capable of predicting recession for up to six quarters ahead.
Recent reports have shown that treasury yields are hanging below 3% which is causing people to panic and rush into assets like precious metals by setting up Gold and Silver 401k accounts especially if inflation continues its upward spiral. However, the 3% yield is completely acceptable should deflation commence.
Inflation and Deflation
Most people actually get confused with inflation and deflation. Simply put, inflation is when prices of goods and services start to rise therefore making it harder for people to make ends meet. It is usually the middle class that gets hit by inflation hard while the rich do not usually suffer. When inflation happens, the gap between the poor and rich widens and makes it harder for people who are already struggling.
On the other hand, deflation is characterized by price dropping. Although this may sound good, deflation has been associated with depression and unemployment. If the prices drop too low, there’s a good chance that an economy would fall through a “Deflationary Spiral”. This is when the cheaply priced goods mean lesser production and therefore lower wages and need for people to meet market demands. Hence, as mentioned above, deflation is somewhat associated with loss of jobs. Of course, not all deflations are followed by depression. In the chart, deflation is shown when the inflation rate goes below zero.
What Can Be Done
Most people consider Treasury Bonds as a safe investment since it is supported by the US Government. With the United States in power, there’s a good chance that redeeming their bonds wouldn’t be a problem. However, the economic downturn is producing a sad future for bonds. Although the bonds themselves are in good position, the yield is no longer enough to satisfy investors. For this reason, they are choosing to diversify further and not just place all their assets in US treasuries.
This paves the way for investments in other industries like company shares and even precious metals with IRA Gold portfolios. A lot of them are partial to gold due to its stability throughout the years. By diversifying their assets into investment vehicles like Gold IRAS, investors can also be sure that they remain protected even if one industry collapses.
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