I recently wrote a post about U.S. Treasury securities which have been rising in price as interest rates have come down. In the post, I called the Treasury rise a bubble and I stick by that moniker despite protests from some astute readers.
However, I do want to point out one reason why Treasurys are rising. Inflation.
Non-Seasonally Adjusted CPI
Inflation is plummeting and that means inflation will soon become deflation. The U.S. Consumer Price Index (CPI) was released yesterday, showing that inflation fell 1.9% in the last month alone. Prices are only 1.1% higher than last year at this time. In July that figure was 5.6%.
To be sure, much of that decline comes from the drop in oil prices - the energy index fell 17% in November. Nevertheless, this inflation report is a clear signal that prices are plummeting and that the Federal Reserve has been powerless to stop the fall.
Certainly, this is a very good reason why Treasury prices are rising.
Source: Consumer Price Index Summary - Bureau of Labor Statistics