Wikinvest Wire

Ten-year Treasury yield dips below 3 percent

Wednesday, November 26, 2008

You don't see this happen everyday. Actually, you dont' see this happen ever. Earlier today, the yield on the ten-year U.S. Treasury dipped below three percent for the first time ever.
IMAGE Pretty amazing...

Investors are so terrified of what they see all around them that they've bid up the price of super-safe U.S. debt to levels that will only pay them 3 percent per year for the next 10 years.

[Note: The term "super-safe" as used above implies that you'll be sure to get your money back after ten years, but there's no telling what (if anything) that money will buy.]

Sure, there were a bevy of bad economic reports again today - durable goods orders plunged, new home sales tanked, jobless claims remained firmly in recession territory, and there is nothing to be thankful for in the manufacturing sector - but it's not the end of the world.

Is it?

In the entire 46-year history of the 10-year note, the yield has never been lower.
IMAGE Now might be a good time to get into one of those short-Treasury funds like they have over at Rydex and ProShares.

The only way that Treasury yields can go any lower than they are now is if investors become even more terrified than they already are and that just doesn't seem possible.

Does it?


Todd said...

PST is the 10 yr short....I tried when yields went down to 3.60...There will be a day when we will laugh at the pathetic yield here, esp in light of plenty more coming in the next few years, and probable reluctance on the part of foreigners to buy, but in the meantime, everyone just wants to hide.

If I was China, I'd be selling all inventory here.

Anonymous said...

Do you have any thoughts on the idea that the gov is buying its own 10 year notes with the goal of lower 10yr rates = lower mortgage rates.

Anthony J. Alfidi said...

Those short-Treasury funds are highly leveraged. Wouldn't it make more sense to just wait a year or so? Yields will have to come up as foreigners start dumping a declining dollar.

Tim said...

From Bloomberg: “The primary driver behind the fall in Treasury yields this month was the deterioration in the economy and the sinking realization that deflation could be a factor of life going forward,” said Bulent Baygun, head of interest-rate strategy in New York at BNP Paribas Securities Corp., one of the 17 primary dealers that trade government securities with the Fed.

I think the plan is to keep everyone terrified of one thing or another so they'll keep buying Treasuries.

Anonymous said...

Bailout 2008, a poem by David Jeffrey

Like a bloodied warrior,
laying broken and torn.

Like a dying soldier, hopeless and forlorn.

But the blood, it be green,
the color of money.

And the soldier is an economy,
and it is anything but funny.

Broken are it's people and shattered are their dreams.

Thanks to the ultra rich and their full proof schemes.

It is a tragedy with more pain to come.

Finance will be Hell, and their wills will be done.

Anonymous said...

very nice

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