Relationship between dividend yield and 10-year Treasury yield
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Dividend yield and 10-year Treasury yield There has been a relationship between bond yields and dividend yields historically. The chart below shows that the dividend yield has been higher than 10-year yield until 1960s when the relationship changed. The anchor for equity valuation during that period was the dividend yield: when the yield was higher than the bond yield, it would make sense to buy equities because they were considered undervalued. As already explained, in the pre-Keynesian world bond yield volatility was insignificant because inflation was close to zero. However, in the era of fiat money inflation soared which was much worse for bonds than equities.
Relationship between dividend yield and 10-year Treasury yield
Relationship between dividend yield and…
Relationship between dividend yield and 10-year Treasury yield
Dividend yield and 10-year Treasury yield There has been a relationship between bond yields and dividend yields historically. The chart below shows that the dividend yield has been higher than 10-year yield until 1960s when the relationship changed. The anchor for equity valuation during that period was the dividend yield: when the yield was higher than the bond yield, it would make sense to buy equities because they were considered undervalued. As already explained, in the pre-Keynesian world bond yield volatility was insignificant because inflation was close to zero. However, in the era of fiat money inflation soared which was much worse for bonds than equities.