The Run to Safety: Ten-Year Treasury Hits All-Time Low

You don't see this happen every day. Actually, you don't see this happen ever. Earlier today, the yield on the 10-year U.S. Treasury dipped below three percent for the first time ever.
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.
Now might be a good time to get into one of those short-Treasury funds like they have over at iShares 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?

Comments

[ikkyu:]

"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?"

My understanding is that quantitative easing implies buying long term debt to drive down that part of the yield curve. I am not sure i go along with your purely contrarian call. Look at how low japanese 10-year notes went! I would wait until a chart shows a downtrend.

Cheers,
john

2008 Nov 26 11:46 PM

[random2348:]

Look at where Japan and the U.S. rank on this list:

https://cia.gov/library/public...

2008 Nov 27 03:21 AM

[random2348:]

I'm not sure why that link doesn't work - try this one instead: www.google.com/search?...

2008 Nov 27 03:22 AM

[jepittman:]

As the fear abates prices will fall again. These levels of emotion can last awhile but in my experience they are not sustainable.

2008 Nov 27 11:06 AM

[novice_inve...:]

Are there any criteria for choosing between PST and TBT? TBT seems to be down a larger % than PST. Thanks.

2008 Dec 04 12:28 AM