How Low Can Bond Yields Go? A Lot Lower
There are five primary reasons why market rates are likely to set record lows sooner rather than later.
There’s a bull market in bonds.
Photographer: Drew Angerer/Getty Images North AmericaU.S. Treasuries, the global benchmark in financial markets, have enjoyed an impressive rally as investors sought a haven from turmoil in riskier assets. The gains have pushed yields on 10-year notes to 1.70% this week, far lower than the more than 3% that economists at the start of the year expected them to be by now. And the move toward even lower yields isn’t likely to be over yet.
Market participants should brace for 1% yields before too long for five reasons. Two of the determinants are domestic: expectations for real, or inflation-adjusted,economic growth and inflationary expectations. The other three arise from outside the U.S.