Recently the news has come on the internet that on 23 October 2023 during the trading session, the US 10-year government bonds yield crossed 5%. Generally, the interest rate circulated between ten-year Indian government bonds and US government bonds in the 400 to 600 basis points. But recently the spread arrived at a decadal low of around 250 basic points. Since the news came on the internet it went viral. Now lots of people are curious to know about what makes US government bonds attractive, and should you invest? Here we have more information about the news and we will share it with you in this article.
Factors to consider for investing in US government bonds
A few factors that have been good for investing in US government bonds include the following.
Good yield – the yield on US government protection of diverse adulthoods, such as 1, 2, 3, 5, 7, and 10-year, is in the 4.5% to 5.5% range. There have been attractive yields when compared to the yield on these securities in the past. This yield was last seen in 2007-08, which was 15 years back. The current elevated yields will not previous for too long. Scroll down to the next page for more information about the news.
Potential for capital appreciation – The current product on US government bonds is high as the US Federal Reserve has increased interest rates to combat high inflation. But in the previous year, the US inflation has come down significantly from the 9.1% peak rate to 3.70% in September 2023. Once the inflation rate drops to the US Fed’s target of 2% or below or the US economy stalls, especially/in recession, the US Fed shall cut interest rates.
Interest rates and bond costs have an inverse association. When interest rates fall, the bond costs increase and vice versa. So, whenever the US Fed cuts interest rates, the bond expenses will rally, and you will have a chance to make capital gains. The bonds with a more extended maturity (5,7,10 years, etc) have a more elevated sharpness to changes in interest rates compared to bonds with lower maturity (1, 2, 3 years, etc).
How to invest in US government bonds
Now that we comprehend the advantages of investing in US government bonds, let us look at how to invest in them. Recently, two AMCs have launched three mutual fund schemes that permit you to invest in US government bonds. Here we have shared all the information which we had. Stay tuned to us for more updates.