InvestNow News 5th July – Devon – Investor Update – June 2019
June 2019
Will Interest Rates Support Share Markets, Again?
Since November 2017 global interest rates have fallen sharply. While the trend towards declining interest rates over the last 30 years has been clear, the rate of decline has increased significantly and become more fascinating as interest rates approach zero. The most important benchmark for this has been the pricing of US 10-year Treasuries where the interest rate since November 2017 has fallen from 3.2% to 2.0%, whilst yields on Australian and New Zealand government 10-year debt haves also collapsed, to 1.35% and 1.6% respectively.
Few young investors will remember the close to 20% interest rates on offer from government bonds in the 1980s. The degree to which these financial assets have been repriced are in themselves very important as these are the key interest rates off which the prices of all assets are fundamentally set. Investors will compare the value of any cashflow generating asset to the yield offered by government bonds (also known as the risk-free rate). This rate helps set the price of all assets from shares, to property, farms, forestry, commodities and even things as obscure as cryptocurrencies.