Bond yields in a time of low interest rates

Investors have had to get used to low returns from many lower-risk investments. That’s partly because the Federal Reserve has kept its benchmark interest rate near zero since December 2008. The Fed said last week that it expects to maintain that policy for at least another three years because the economic recovery remains fragile.

Yields for certain types of bonds closely track interest rates. That means investors should expect yields to stay at or near record lows for Treasurys and money-market mutual funds. Factoring in the current inflation rate of about 3 percent, an investor can end up losing money. It’s a critical concern for retirees depending on investment income from bonds to cover daily expenses.

Here are Wednesday’s Treasury yields, and average yields for money-market funds through the seven-day period that ended Tuesday:

10-year Treasury: 1.83 percent

30-year Treasury: 3 percent

Three-month T-bill: 0.06 percent

Taxable money-market funds: 0.02 percent

Tax-free and municipal money-market funds: 0.01 percent


Sources: U.S. Treasury, iMoneyNet Inc.