Here's why short-term yields are more attractive than stock dividends right now

With increasingly attractive valuations and no economic imbalances, the front end of the bond market is an opportunity for investors. Higher-yielding short-term investments can help hedge bond portfolios from the impact of rising rates. Short-term yields look much more attractive than many stock dividends at the moment. Value in Short Bonds: ‘We’re Not in Kansas Anymore’ For years after the financial crisis, many investors were resigned to earning next to nothing on their cash and short duration investments. Rising interest rates, however, have brought a new reality: The front end of the fixed income market looks attractive for the first time in almost a decade. In fact, short-term yields look much more attractive than many stock dividends and longer-dated fixed income instruments.

Much like Dorothy in "The Wizard of Oz," investors are suddenly waking up to a bright new world: The trend toward higher rates has fundamentally altered the investment landscape and appetite for risk.

The primary reason for the new reality is the Federal Reserve. For more than two years, the Fed has worked to remove its post-crisis emergency policy measures, raising the fed funds rate six times to its current range of 1.5%–1.75% and reducing the size of its balance sheet. PIMCO believes rates will continue to rise in 2018 and 2019, making investment strategies with limited interest rate exposure attractive for both their returns and their low volatility.See the rest of the story at Business Insider

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See Also:

• Warren Buffett said bonds are a 'terrible investment' — but by his own yardstick, stocks look even worse
• What's happening in the bond market could be pointing to a stock rally ahead
• Markets shouldn't worry too much about the recent rise in yields

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