Which Way to Higher Bond Yield? by Frank Holmes
The U.S. 10-year Treasury bond yield fell below 2 percent on Tuesday. Its global peers Japan and Germany have similarly witnessed their 10-year yields drop in recent weeks, though slightly more dramatic, hitting close to the zero mark.
This news, along with economic uncertainty out of the eurozone, will have investors seeking higher-yielding alternatives in the bond market.
One place investors can look is to municipal bonds – consider the chart below.
Walter Schloss isn’t a name many investors will have heard today. Schloss was one of the great value investors who trained under Benjamin Graham and specialized in finding cheap stocks. His track record was outstanding. In Warren Buffett’s 1984 essay, the Super Investors of Graham-and-Doddsville, he noted that between 1956 and 1984, Schloss’s firm returned Read More
When comparing muni bonds to similar investment options within the global marketplace, you can see that they have provided greater returns for investors on a tax-equivalent basis.
Director of Research and portfolio manager John Derrick explains that, “on a tax-equivalent basis, 5-year municipals are yielding close to 10-year Treasuries (approximately 1.95 percent), which offers considerable value, especially with the 5-year German and Japanese notes at, or very near, zero.”
We believe that in a low rate environment, there is opportunity to be found in short-term municipal bonds, like our Near-Term Tax Free Fund (NEARX). NEARX is actively managed by professionals who closely monitor the bond market and the overall interest rate environment.
“The fund is exactly what most people would expect from a short-intermediate municipal bond fund,” says John. “NEARX invests in high-quality municipals and invests for the long run with low portfolio turnover. The fund’s strong, long-term track record speaks for itself; it has a time-tested history of no drama.”
The Near-Term Tax Free Fund has received the coveted 5-star overall rating from Morningstar, among 173 Municipal National Short-Term funds as of 12/31/2014, based on risk-adjusted return. If you’re seeking an opportunity for yield and tax-free monthly income, I encourage you to turn in the direction of NEARX and request an information packet to learn more.
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.