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LONG BOND YIELDS ARE STILL HIGH

Despite the sharp decline in yields on long-term bonds since November, they are still paying high rates when compared to their historical averages, says Lacy H. Hunt, chief economist for HSBC Securities and Marine Midland Bank. Real yields -- the amount paid on bonds, minus the current inflation rate -- "are still far above the average measured from when Treasuries first began freely floating in the early 1950s," he says. The inflation-adjusted yield on a 10-year Treasury note recently was 4.4 percent, well above the average of 2.6 percent since 1953. The real yields on corporate bonds are even better, he says. The real yield on AAA corporate bonds recently was 5.32 percent, compared to an average since 1900 of 2.13 percent. "The latest readings of real long-term yields suggest that investors still ought to have a meaningful incentive to shift from shorter- to longer-term investments," he says.

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