10 Year Treasury might be headed to ZERO!
The Annuity Man
Thomas Frank and Michael Sheetz's article on CNBC addresses the stark reality of the U.S. 10 Year Treasury note possibly headed to 0% interest. Their take is a tad sobering...to say the least.
It wasn't too long ago that I was fielding calls from clients and propects that were mad about the 10 Year Treasury being at 2.50%. They all said things like, "rates have to go up" or that they didn't want buy "at these low rates." Hindsight is always 20/20 my financial friends!
Once again, no one knows where interest rates are going to go. Yes, it does look like we might be headed to ZERO...but my contrarian instincts point me to the opposite of that herd mentality thinking. To say that people and the media are overreacting about "the virus" is the understatement of the century. Their constant over-hyping is helping drive rates down.
The annuity industry is one of many industries that will become collateral damage to this new flu (i.e. virus). The U.S. 10 Year Treasury note is the "bogey" go-to rate for all things annuity. Even though lifetime income annuity guarantees are primarily based on life expectancy at the time you start the payments, interest rates (i.e. U.S. 10 Year Treasury) do play a secondary pricing role.
If the U.S. 10 Year Treasury note goes to ZERO, all annuity types will be negatively affected. That's just the brutal truth. A double whammy would be if annuity companies changed the life expectancy tables in conjunction with rates in free fall.
The bottom line is this continuous rate drop will hurt retirees and the 10,000+ baby boomers reaching retirement age every single date. After decades of hard work, this is one last financial blow that will "leave a mark" for a very long time.