The monthly average yield of 10-year Treasury bonds shows that the yield of 10-year Treasury bonds has never been so low in a period of time.
Novel coronavirus pneumonia is the latest economic collapse in the world, according to the report. Bond yields fluctuate inversely with bond prices, so when investors buy relatively safe bonds and sell riskier assets, bond yields fall. With major U.S. stock indexes down more than 10%, money is pouring into the bond market.
The 10-year Treasury is a key indicator of economic trends, as interest rates on other debt are linked to it. For example, a fall in the interest rate of 10-year Treasury bonds often leads to a fall in mortgage rates.
The report pointed out that the low yield of treasury bonds is not only in the United States. Since the financial crisis, many benchmark interest rates have been pushed into negative areas by the active easing measures of central banks, making us treasury bonds one of the few super safe assets with positive yield.
Scott Maynard of Guggenheim Securities said interest rates in the United States could fall further in the continuing environment of loose monetary policy by central banks.
The yield curve is now easily below 2%, a record low, he said on the US consumer news and business channel closing bell on February 26. It is highly likely that if central banks continue to operate money printing machines, bond yields will be further lowered, which will help support speculative assets elsewhere, including junk bonds.
Since the financial crisis, the U.S. central bank has kept its benchmark interest rate at an all-time low, which was less than 1% from December 2008 to 2017.
It is reported that the Federal Reserve cut interest rates three times last year, keeping the benchmark interest rate in the range of 1.5% to 1.75%, after slowly reducing the benchmark interest rate to more than 2%. Options traders expect the fed to take further positive action and cut interest rates four times this year.
If central banks have in fact been trying to curb the still strong deflationary factors, there is no reason to think that inflation will return, said Ed yadney of the US research firm yadney. Theres no reason to expect bond yields to pick up. Bond yields are likely to remain historically low for the foreseeable future.