Wednesday, May 30, 2012

1.625

Are we on the brink of something massive? 10-year US Treasuries hit the lowest yield in the last 60 years, of 1.625% yesterday.
Muy Bien! :)
Now, people will start talking of how there is fear in the markets and that there are very few deals to chase which is forcing a lot of asset allocators to park their money in US Treasuries. The biggest problem with a field yield curve is that it prevents lenders from lending prudently while still earning a good spread on their deposits/ liabilities. A flat yield curve, in effect, acts as a counter-stimulus to the monetary stimulus.
All-time low yields can of course be beaten by lower yields but are usually followed by a bear or stagnant bond market - look up Japan por favor.
May we live in interesting times :)

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