How low can it go?

The yield on the 10-year Treasury hits a milestone of sorts. What does this say about the global economy?

By Kim Peterson Jun 29, 2010 2:08PM
Arrow © Cory Docken/JupiterimagesAy yi yi, the yield on the 10-year Treasury dropped below 3% Tuesday. That hasn't happened since April of 2009.

Since yield moves against price, The Wall Street Journal wondered if the rally in Treasurys might finally have peaked. One bond watcher from Nomura isn't sure, and tells the newspaper he doesn't advocate shorting the bond market yet.

This yield was unimaginable just a few months ago, when people thought that yield had nowhere to go but up, writes Barron's. The five-year note already dropped through 2%, and the three-year note was dangerously close to 1%. The two-year note fell to 0.59% and before recovering to 0.62%.

Some experts told Barron's that they expected the 10-year Treasury to get back to the mid-3% range in the next year, writes Randall Forsyth. But the Royal Bank of Scotland asked investors to "think the unthinkable": yields below 2%. The global financial system is on the "cliff-edge," the bank's interest team said. Forsyth continues:
For those who are listening, record-low Treasury note yields are screaming an unambiguous message: the market is discounting deflationary, depression conditions, even if mainstream economists are not.

The Surly Trader tries to read deeper into the two-year Treasury, and says the yield is a sign that the market thinks the Fed will maintain its "extremely accommodative" monetary policy through perhaps even 2011.

We should be worried about deflation, not inflation, at this point. "If the Fed is not expected to raise short-term interest rates and inflation is expected to be low, then we should expect very low growth levels and a slow recovery in employment levels," the Surly Trader writes.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.



Quotes delayed at least 15 min
Sponsored by:


There’s a problem getting this information right now. Please try again later.
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] Equity indices continue drifting near their recent levels with the S&P 500 (+0.1%) showing a slim gain, while the Russell 2000 (+0.6%) remains near its session high.

Not much has changed among the ten sectors with materials (+0.6%) and industrials (+0.5%) remaining ahead of their peers. The industrial sector has continued drawing support from transports as evidenced by a 1.0% gain for the Dow Jones Transportation Average.

However, the solid gain masks the ... More


There’s a problem getting this information right now. Please try again later.
Sponsored by: