U.S. Bond Market May Be in ‘Bubble,’ Yale’s Shiller Says

The U.S. bond market surge that has pushed debt yields to record lows may constitute a “bubble,” said Robert Shiller, a Yale University economics professor who predicted the collapse of the U.S. housing market.

“I would say we’re at record low” on long-term rates, the co-creator of the S&P/Case-Shiller home-price index said today at a conference in Oslo. There has been “gradually increasing confidence in U.S. debt” in the past 30 years, he said.

Demand for Treasuries has pushed U.S. government debt due in 10 years or more up 28 percent in the past 12 months, the most among 144 government-bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Ten- year yields fell more than 140 basis points in 2011 as Europe’s debt crisis intensified.

Yields on benchmark 10-year notes fell two basis points, or 0.02 percentage point, to 1.95 percent at 8:11 a.m. New York time, according to Bloomberg Bond Trader prices. Yields dropped to a record low 1.67 percent on Sept. 23.

Shiller is also the author of “Irrational Exuberance,” a book published in 2000 that predicted the stock market collapse.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Kati Pohjanpalo at kpohjanpalo@bloomberg.net

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