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A sub-1% 10-year yield is near

Mar. 01, 2020 8:26 PM ETBy: Stephen Alpher, SA News Editor56 Comments

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02 Mar. 2020
No one buys and holds those bonds anymore. Those bonds are used to "park" money for a while until the owners have other options they are comfortable with. Why is it so surprising in times of perceived uncertainty that US bonds yield decline???? Our financial markets are no longer investing markets but trading markets. The old rules that I grew up with and my father used really do not apply. For people of 50 think back to the 80's most of of us had no idea what our stocks were doing hour by hour we may have only checked prices maybe once a week in the paper. Our system trades on reaction or worse overreaction.
Overreaction here is plentiful, must be a good time to have cash to buy stocks. Been saying for many, many years that interest rates hadn't bottomed... but the idea of mortgage rates at 0% or something off the wall, isn't going to happen.

Think we probably bottomed anyway short term, if not we're probably close to it (interest rates)... stocks could probably shed abit more before launching to new ATHs.
Sub 1% yield on the 10 year means that the US economy is in recession, along with the rest of the global economy.
Use any rallies over the next couple of days to short the market. If the TB don't bounce back convincingly when the market rallies early today you can begin to add to your short positions.
Diesel profile picture
When are we going to get 1% mortgage rates?
keep an eye on ARM rates... they should drop in the low 2's soon.
Me XMan profile picture
You can't put money in savings anymore.
SharkLady profile picture
wait, why are futures green?
People are getting desensitized to the media bombardment.
Diesel profile picture
In the long run, low bond yields are actually bullish for stocks.
This is an interesting five-handed dilemma that makes me glad not to have the duty of solving.
On the one hand, heavy-handed requests to lower rates are for reasons not in the FOMC sphere of influence.
On the other hand, not matching the irresponsibly low rates of other countries puts US manufacturing at a competitive disadvantage due to higher borrowing costs and stronger dollar.
On the third hand, rates below the true "cost of risk" will directly contribute to and exacerbate the effects of a future recession.
On the fourth hand, the people are demanding it.
On the fifth hand, these rates disproportionately benefit those at the top of the borrowing scale (trickle down economics) compared to those at the bottom. Thus the policy will contribute to the bogey-uncle (the bogeyman is now Coronavirus) "wealth gap" that the same people demanding low rates claim is the enemy of society.
Here's the question... at what point are Treasury yields so low that investors would rather by US stocks and get twice the yield? When that occurs, the stock market is at the bottom. 10 year treasury rates below 1% will ultimately push up the value of risk assets even more. If the US manages to avoid the brunt of the impact of the coronavirus, we could end up in a scenario where US stocks rally while foreigners buy our bonds and stocks in a flight to quality and yield.
gla9 profile picture
01 Mar. 2020
then why hasn't low rates in Europe and Japan raised the price of dividend paying stocks in those countries?
@gla9 - because the growth prospects in europe and japan suck. Their populations are in decline and the demographics are awful. But on a relative basis, low and negative rates in europe and japan have boosted their equities as well. Said differently, if their rates were instead 5%, their stocks would be much lower than they are. Low rates always boost the present value of future cashflows.
gla9 profile picture
01 Mar. 2020
yes but not sure the cause-effect you are making is quite right.
Europe/japan are slow growth therefore their interest rates are zero/negative.
they would only have 5% interest rates if they had robust nominal growth. Agree?
So if US rates go from 2% to zero or negative you seem to be saying that is good for stocks, but i would say its a comment on weak GDP growth, and therefore not good for stocks.
no fake news, Japan’s issues stem from population contraction while the US is one of only a few countries with domestic population growth as the millennials reach working age. Mexico and Turkey have this advantage as well, while nearly every other country will Japanify, including China, look into it
Hope you all bought tickets to the meltdown last Friday.

The price of admission was puts on the $SPX and restaurant stocks trading above $100.

Time to sit back and watch the show.
Buddha1010 profile picture
I love it.

Will refinance my mortgage with 7/1 ARM at 2.25% or lower.
arok79 profile picture
wait. rates will be sub 2% real soon. eventually they are going to ZERO
@arok79 mortgage rates?
arok79 profile picture
and yes, mortgage rates will go to zero. we are all heading there. it's hard to believe but that's where it's headed. sad to say.
Time to go negative...!!! Keynesian economics is great...!!!!
Gold is a clear buy during these times. The action on Friday was temporary. Now with 100 bps priced in and sub 1% yield Gold is much better safe haven than any of the paper assets. I got a little blindsided with the Gold action last week with the miners getting crushed but im certain a strong bounce is in the cards. We might see Gold hitting 1700 next week.
Are you buying direct or just the GDX ETF?
I buy anything I can get my hands on. I’ve bought physical, leveraged gold ETFs, leveraged and unleveraged miner etfs and individual high quality miners.
WhyNotBuy profile picture
The USA is about to join the world of negative rates. Gold is going to 7000. IMHO
RonAFGreve profile picture
Gold at 7000 sounds appealing :-)
they would be ripping old folks teeth out on the streets at that price
Michael Bryant profile picture
All we need is another 3 weeks or so with similar plunges to nearly match the plunge in the Credit Crisis. I have waited a long time to buy on sale. Maybe buy $GILD, $HON, $JNJ, $MMM, and $GE. I'm not sure how much $APT can rise, but I can see it jumping from $40 and $15 for a long time.
youngdividend profile picture
I won't ever sell any stocks but I am starting to get a little worried where we are going. I live in Ontario and home prices are getting out of control. Just on my way home from the gym in the last four days I saw two homes with For sale signs getting sold within that time frame. I asked my real estate agent about those two homes and he told me they both had open houses for the weekend but got sold way before on a bully offer. One house got $60k over asking and the other one got $50k over asking. When I told my dad that, he said back in the early 2000s there was no such thing as over asking. My dad who owned 3 rentals and never went over asking and usually paid way less than market value. The last few friends I have talked to who have bought houses have told me they have paid over asking. Are we in a housing bubble if interest rates stay this low?
Michael Thomas profile picture
Everyone knows it's coming, nobody really knows what the hell it means. Outside of making it more difficult for savers to earn anything.
BeneGesserit profile picture
Fed can print but the new money will flow into treasuries (until deeply negative), then gold and BTC once they signal the flood of new money. Production and consumption can't occur without a supply chain to support it. Unfortunately this isn't a problem the FED can solve and it'd be irresponsible of them to pretend they can.
Irresponsible is the modern central banker's middle name.
"The Bond Bull Market is About to End, Here's Why"
--people from the last several years who probably don't have any money left lmfao
joeliebig profile picture
Bunds have been negative for a while now ... this is the new normal
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