For First Time in 150 Years, World's Benchmark Bond Is Sub-1%

It is hard to exaggerate the historic significance of Tuesday’s events in the bond market.

Following the Federal Reserve’s emergency cut to overnight rates, the 10-year Treasury yield — which is taken as the notional “risk-free” benchmark rate for financial transactions across the globe — dropped below 1%. According to historical work by Robert Shiller, the Nobel laureate economist at Yale University who has reconstructed the 10-year interest rates available in the U.S. back to 1871, it has never before dropped this low. Many momentous events have shaken the U.S. since Ulysses S. Grant’s presidency, but none of them were sufficient to drive long-term money down to such cheap levels:

The decision to make an emergency cut was not well-received and appears to have been interpreted by the markets as a measure of desperation. There is little history to guide us, but emergency cuts have in recent history been followed by extreme conditions in capital markets.