Government Bond valuation - real yields vs history
EU 5-Year Real Yield
Insights | EU
Real Yields represent the true "cost of capital" adjusted for inflation. Historically, rising real yields create a "gravity" effect on asset valuations, making them fundamentally cheaper in price. A high real yield implies tighter monetary conditions, often creating a value discount for equities.
CURRENT READINGS
The EU 5-Year Real Yield sits at 1.20%.
The historical median value is 0.40%.
MARKET IMPLICATIONS
When yields enter the "very cheap" top band, fixed income becomes highly competitive, forcing equity multiples to contract to maintain attractiveness.
US 10-Year Real Yield
Insights | US
The US 10-Year Real Yield acts as the benchmark discount rate for global risk assets. By analyzing where current real yields sit relative to their historical quartiles, we can gauge the fundamental macroeconomic pressure being applied to stock multiples.
CURRENT READINGS
The US 10-Year Real Yield sits at 1.96%.
The historical median value is 1.00%.
MARKET IMPLICATIONS
Lower real yields ("expensive" quadrant) historically correlate with higher equity valuations, as the opportunity cost of holding stocks is diminished.