Dow Dividend Yield Versus 10-Year Treasury Yield

There has been a lot of talk this week about how "the great bond bubble" is about to crash and that equities look attractive compared to them.  One datapoint that commentators have been citing is that the Dow's dividend yield is now greater than the 10-Year Treasury yield.  We've heard some say that this is the first time this has happened in decades, but in actuality, the Dow's yield got much higher than the 10-Year yield as recently as late 2008 and early 2009. 

Below is a chart of the Dow's yield minus the 10-Year yield going back to 1920.  (Up until the early 90s, the data is weekly.)  As shown, the Dow's yield did just recently tick higher than the 10-Year yield, which is out of the ordinary but not without precedent.  In fact, from 1920 to the late 1950s, the Dow's yield was higher than the 10-Year yield almost all of the time.  In the 60s, 70s, and early 80s, the reading trended significantly lower, but since then the reading has been trending higher. 

Since the comparison has been floating around all week, we figured we would highlight the historical relationship to give readers some perspective.

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