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2010.11.0512:40:00UTC+00Us fED s Recent Step may Help Companies and Hurt Long-Term Saving

News:

  • US Fed's recent step will help the US economy recover, but may end up hurting pensioners and other long-term savers, at the extent of helping large companies.
  • With dipping bond yields and interest rates at low levels in the near future, investors are likely to struggle earn income from savings unless exposed to riskier assets.
Quotes:
  • "They are crucifying the class of investors who invest in Treasuries, particularly the class of elderly or fixed income investors because it gives them no bang for the buck," said Greg Habeeb, portfolio manager at Calvert Asset Management in Bethesda, Maryland.
Background:
  • Fed data shows, average returns on six-month certificates of deposit in the secondary market dipping to 0.35 pct, against 1.74 pct at the start of2009 and over 4.5 pct at the start of 2006.
  • Yields on benchmark 10-year bonds have now dropped to 2.52 pct, after generating a return over 4 pct from 2005 to 2008 and over 6 pct in 2000.

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