Heading into 2016, it looked as if income seekers might finally catch a break. With the economy revving up, the Federal Reserve finally lifted its benchmark short-term interest rate last December. In theory, that should have nudged up rates on bank deposits and rippled through the bond world, pushing yields up to more-attractive levels.
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Earnings for All
- Bank Accounts: 1%-4%
- Municipal Bonds: 1%-3%
- Investment-Grade Bonds: 3%-5%
- Real-Estate Investment Trusts: 2%-6%
- Foreign Bonds: 3%-6%
- Preferred Stocks: 4%-7%
- Closed-End Funds: 5%-11%
- High-Yield Bonds: 6%-8%
- Master Limited Partnerships: 5%-11%
Yet the markets have largely shrugged at that logic. True, you can now squeeze out a bit more income from money market funds and other types of short-term savings accounts. But long-term bond yields, which the Fed doesn't directly control, have slumped as investors bet that the economy isn't strong enough yet to handle higher rates. Buy a 10-year Treasury note and you'll pocket a 1.8% yield, down from 2.2% at the start of 2016. At that pace, your income won't even keep up with "core" inflation, which excludes food and energy costs and, Kiplinger expects, will rise 2.4% this year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
