US 10 Yield Back Below 2%
Jolted by disappointing economic data in the U.S. and China, investors rushed into safe-harbor Treasury bonds and German bunds.
The 10-year Tsy yield will probably will be at 2% or lower for a considerable time to come. The term structure of interest rates is predicated upon short term rates which are effectively ZERO PERCENT, plus expectations of short term rates at various times in the future. Here’s a thought experiment: What would happen to the 10-year Tsy yield if the Fed announced today that it was going to maintain ZERO INTEREST RATE POLICY in place for the next 10 years? US Tsy yields appear likely to follow the 10-year bund to new all time lows. Japan has already paved the way. Here’s my take on it from when I worked at Reuters…..
08/05/11 US economic path more like Japan than Greece, Rombach says… http://reut.rs/qWH59r
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