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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