Home Daily Blitz One Paragraph that Sums Up Why Treasury Yields Are So Low

One Paragraph that Sums Up Why Treasury Yields Are So Low


The following is an excerpt from Amey Stone | August 28, 2017 | Barrons.com |

It's a challenge for investment strategists to write succinctly about market forces in their commentary.

Piper Jaffray's Dimitri Delis does an admirable job in a Monday note.

Wondering why Treasury yields are so low -- and likely headed lower? Here's one paragraph that sums up four main reasons:

Treasury rates have been tracking Fed fund futures lower as expectations for rate hikes have been falling given persistently low inflation and lack of progress on fiscal/tax reform. Despite a Republican majority in Congress, the lack of internal party consensus does not bode well for future legislative action. The upcoming debt ceiling/budget discussions could be just as rancorous as in 2011 and further delay the timetable for rate hikes. Furthermore, a weakening dollar may pressure foreign governments that depend on exports, to weaken their currency by buying US Treasuries which may also be supportive of rates.
The 10-year Treasury note closed with a yield of 2.16% at 5 p.m. ET Monday. The yield was at 2.37% in early July.

Another, very recent, reason rates are likely headed lower happened after Delis wrote his note -- North Korea appears to have fired a missile over Japan late Monday. That event led to risk off trading after market hours.

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