30 year treasury yield drops below 2% for the first time in history

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MotoTrojan
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30 year treasury yield drops below 2% for the first time in history

Post by MotoTrojan » Wed Aug 14, 2019 9:05 pm


boglerdude
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by boglerdude » Thu Aug 15, 2019 12:16 am

Finally got my money back from buying EDV in 2016 before the election. When I started investing.

We weren't in a recession then (?)

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by HawkeyePierce » Thu Aug 15, 2019 12:21 am

Boy am I glad I shifted to long term Treasuries earlier this year. :D

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Wakefield1 » Thu Aug 15, 2019 1:52 am

I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Valuethinker » Thu Aug 15, 2019 4:21 am

Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by RAchip » Thu Aug 15, 2019 4:56 am

I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years. I presume people buying these are just betting rates will continue to fall in the short term so they can sell these for a profit.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by HawkeyePierce » Thu Aug 15, 2019 5:02 am

RAchip wrote:
Thu Aug 15, 2019 4:56 am
I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years. I presume people buying these are just betting rates will continue to fall in the short term so they can sell these for a profit.
I bought them because historically they are less correlated with equities than intermediate Treasuries or total bond. Their performance over the last few months has been a nice perk but I did not shift from total bond to LTT based on any predictions about rates.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by nisiprius » Thu Aug 15, 2019 6:19 am

Consider a series EE savings bond with an interest rate of 0.10%. Someone check my numbers, please, since eyebonds.info no longer seems to have them for EE bonds...

You buy a series EE bond with a face value of $2,000 for $1,000.
At the end of 20 years, the redemption value, after reaching $1,019.17, jumps to $2000.
It then continues creeping, reaching $2020.09 at the end of thirty years.

That's a CAGR of 2.37%.

Or, back of the envelope, it doubles in thirty years, so, by rule of 72, 72/30 = 2.40%.

So currently series EE savings bonds are yielding more than 30-year Treasury bonds.

Of course the rate is even better if you don't sit around accepting 0.10% for ten years after maturity; rule of 72, doubles in 20 year = 3.60% which is considerably higher than the current 1.8% rate for 20-year Treasuries.

Useless, of course, but mildly interesting.

I wonder if the Treasury is going to do something bad to EE bond terms and conditions in order to prevent this situation? Not that it poses either a real problem or much of an opportunity, thanks to the annual purchase limit.
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Seasonal » Thu Aug 15, 2019 6:34 am

Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence inestors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
More broadly, it likely reflects their expectations of economic and market conditions and the Fed's reaction to those. If the economy is slow then there won't be much demand for credit, decreasing rates, and if the economy is slow the Fed will cutting or at least not be raising rates.

There's a global market, including for credit, so economic conditions and rates in the rest of the world have an impact on US rates.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Bacchus01 » Thu Aug 15, 2019 6:59 am

Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
No. Investors believe there is a threat to equities in the short term, so they are fleeing to the safety of long turn returns. Fed rates play a part, but this is all about risk management. The alternatives are more risky than they would like, so flee to safer investments.

Seasonal
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Seasonal » Thu Aug 15, 2019 8:37 am

Bacchus01 wrote:
Thu Aug 15, 2019 6:59 am
Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
No. Investors believe there is a threat to equities in the short term, so they are fleeing to the safety of long turn returns. Fed rates play a part, but this is all about risk management. The alternatives are more risky than they would like, so flee to safer investments.
"All about risk management" is significantly overstating the case, unless you're defining risk management in an extremely broad sense. Consider why there is a threat to equities. Then consider how that cause (or those causes) affect the economy and markets.

There are a number of moving parts and each part has an effect on the others.

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Carlos Danger
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Carlos Danger » Thu Aug 15, 2019 8:52 am

RAchip wrote:
Thu Aug 15, 2019 4:56 am
I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years.

It's hardly obvious. The current yield of just below 2% on a 30 year treasury, 30 years from now, could look lofty.

I don't know what the future holds, especially 30 years from now. But I'd be willing to be that over the coming few years at least 1.99% could look HIGH, not low.

We shall see. :sharebeer

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by dziuniek » Thu Aug 15, 2019 8:53 am

RAchip wrote:
Thu Aug 15, 2019 4:56 am
I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years. I presume people buying these are just betting rates will continue to fall in the short term so they can sell these for a profit.
What about Japan 40 years ago? that 2% yield would probably look pretty good right about now.

Never say never.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Phineas J. Whoopee » Thu Aug 15, 2019 6:59 pm

In terms of flight to safety, the market reaction to S&P downgrading US federal debt from AAA to AA+ several years ago, in response to political brinksmanship over defaulting, in essence holding ourselves hostage, and the smallest possible change but still indicating it's almost certain principal and coupons will be paid in full and on time, was a move into US Treasuries, lowering their yields.
PJW

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by aristotelian » Thu Aug 15, 2019 7:50 pm

RAchip wrote:
Thu Aug 15, 2019 4:56 am
I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years. I presume people buying these are just betting rates will continue to fall in the short term so they can sell these for a profit.
It's not individual investors like you and me. I just read that Japan has surpassed China in holding over $1 trillion in US Treasury bonds. The alternative for them is to hold negative yielding bonds of other countries. Of course, we could ask why yields are down elsewhere.

What is striking to me is how quickly this happened, when six months ago the conventional wisdom was "rising interest rate environment" and "why should anyone own bonds?"

informal guide
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by informal guide » Thu Aug 15, 2019 8:13 pm

Any one predicting last year-end that Vanguard's LT Investment Grade and LT Treasury funds would both have a YTD return on August 15 2019 of over 22% would have been called loony or worse!

Interest rate pundits seem no better than stock pundits.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by SandysDad » Thu Aug 15, 2019 8:19 pm

I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Dottie57 » Thu Aug 15, 2019 8:25 pm

SandysDad wrote:
Thu Aug 15, 2019 8:19 pm
I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????
Something like a CMA at Fidelity.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by staustin » Thu Aug 15, 2019 8:36 pm

SandysDad wrote:
Thu Aug 15, 2019 8:19 pm
I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????
consider that european banks deposits are liabilities on their balance sheet. the continuing rapid expansion of M3 via the ECB leaves banks overwhelmed with deposits and insufficient loan demand / opportunities in which to deploy those assets. And, to complicate matters, sovereign yields are turning negative. thus, banks have little choice but to assess a carrying cost or incur losses on excess deposits. Our fine central bank has been steadily reducing the money supply... they've paused that effort in concert with the recent interest rate reduction. american banks by and large remain healthy with ample opportunities to deploy deposits and capital. thankfully we're in a very different situation than the euro area.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by MotoTrojan » Thu Aug 15, 2019 8:49 pm

Dottie57 wrote:
Thu Aug 15, 2019 8:25 pm
SandysDad wrote:
Thu Aug 15, 2019 8:19 pm
I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????
Something like a CMA at Fidelity.
How does that help? Yields in money market are quite similar to bank offerings and are made up of government debt which would also presumably be negative yielding.

Disclaimer: Fidelity CMA is my primary bank account (amazing).

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by TNOA » Thu Aug 15, 2019 9:11 pm

Dottie57 wrote:
Thu Aug 15, 2019 8:25 pm
SandysDad wrote:
Thu Aug 15, 2019 8:19 pm
I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????
Something like a CMA at Fidelity.
VUSXX still yielding 2% or thereabouts. How is this happening? I don't understand.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by willthrill81 » Thu Aug 15, 2019 10:18 pm

In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by stlutz » Thu Aug 15, 2019 10:52 pm

willthrill81 wrote:
Thu Aug 15, 2019 10:18 pm
In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
There can't really be any such thing as a "savings glut". Savings is created by debt. If there is a savings glut then there must also be a debt glut. The sum of the left side of the balance sheet always equals the sum of the right side.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by willthrill81 » Thu Aug 15, 2019 10:58 pm

stlutz wrote:
Thu Aug 15, 2019 10:52 pm
willthrill81 wrote:
Thu Aug 15, 2019 10:18 pm
In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
There can't really be any such thing as a "savings glut". Savings is created by debt. If there is a savings glut then there must also be a debt glut. The sum of the left side of the balance sheet always equals the sum of the right side.
Stein believes in modern monetary theory and, as such, argues that private savings equals public debt. And I think that he would argue that we have a glut of public debt.

Again, I don't know.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by stlutz » Thu Aug 15, 2019 11:17 pm

willthrill81 wrote:
Thu Aug 15, 2019 10:58 pm
stlutz wrote:
Thu Aug 15, 2019 10:52 pm
willthrill81 wrote:
Thu Aug 15, 2019 10:18 pm
In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
There can't really be any such thing as a "savings glut". Savings is created by debt. If there is a savings glut then there must also be a debt glut. The sum of the left side of the balance sheet always equals the sum of the right side.
Stein believes in modern monetary theory and, as such, argues that private savings equals public debt. And I think that he would argue that we have a glut of public debt.

Again, I don't know.
Yeah. In the "what if" department, one wonders what would have happened had central banks all coordinated on rate normalization several years ago. Would it have created a recession? Maybe not. Seems to me that Permanent Zero hasn't really worked in Japan and the Eurozone. US Growth accelerated when the Fed started to normalize. Cutting rates when they are at 7% is obviously stimulative. I'm not sure that history has shown that 0% is more stimulative than 2 or 3%, however.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Northern Flicker » Fri Aug 16, 2019 1:42 am

There can't really be any such thing as a "savings glut". Savings is created by debt. If there is a savings glut then there must also be a debt glut. The sum of the left side of the balance sheet always equals the sum of the right side.
I think “savings glut” is economist-speak for high demand for bonds, so saying rates are low because of a savings glut is not saying much.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Raybo » Fri Aug 16, 2019 3:41 am

I wonder if currency issues with the yuan has some impact, as well. To drop the value of the yuan, the only option for the Chinese is buying US Debt (flood the market with cheap yuan).
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by rossington » Fri Aug 16, 2019 4:39 am

aristotelian wrote:
Thu Aug 15, 2019 7:50 pm
RAchip wrote:
Thu Aug 15, 2019 4:56 am
I cant imagine anyone buys 30 year treasuries yielding 1.99% to actually hold for 30 years. Obviously, interest rates will go up some time in the next 30 years. I presume people buying these are just betting rates will continue to fall in the short term so they can sell these for a profit.
It's not individual investors like you and me. I just read that Japan has surpassed China in holding over $1 trillion in US Treasury bonds. The alternative for them is to hold negative yielding bonds of other countries. Of course, we could ask why yields are down elsewhere.

What is striking to me is how quickly this happened, when six months ago the conventional wisdom was "rising interest rate environment" and "why should anyone own bonds?"
**Politics** = Noise/Fake News = Market movement - both intended and irrational.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Valuethinker » Fri Aug 16, 2019 5:37 am

Bacchus01 wrote:
Thu Aug 15, 2019 6:59 am
Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
No. Investors believe there is a threat to equities in the short term, so they are fleeing to the safety of long turn returns. Fed rates play a part, but this is all about risk management. The alternatives are more risky than they would like, so flee to safer investments.
But they could flee into Short Treasuries. That would be even safer (lower risk from rising rates).

But they don't think that the Fed is going to be raising rates, so the long end of the curve is relatively more attractive than it was.

Hence my explanation which was specific to the bond market and the question.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Valuethinker » Fri Aug 16, 2019 5:40 am

Seasonal wrote:
Thu Aug 15, 2019 6:34 am
Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence inestors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
More broadly, it likely reflects their expectations of economic and market conditions and the Fed's reaction to those. If the economy is slow then there won't be much demand for credit, decreasing rates, and if the economy is slow the Fed will cutting or at least not be raising rates.

There's a global market, including for credit, so economic conditions and rates in the rest of the world have an impact on US rates.
I agree - global market for government bonds in particular (but not only). So the bet is one global markets are taking.

But narrowing it down, 10-30 year US Treasury bonds have become marginally more attractive relative to 10 year ones. The market is taking a view on what the Fed is going to do ie loosen not tighten.

What the Fed does is primarily based on its read of US conditions, because the US economy is so large and exports are a relatively small part of its GDP (again, a function of its size, mostly). It does consider international conditions but by and large they only matter to the extent they impact US economic statistics.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Seasonal » Fri Aug 16, 2019 5:42 am

willthrill81 wrote:
Thu Aug 15, 2019 10:18 pm
In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
Many people have been arguing that for many years. If you think of yield (essentially price) as that which clears supply and demand, it's an obvious point.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Seasonal » Fri Aug 16, 2019 5:51 am

Valuethinker wrote:
Fri Aug 16, 2019 5:40 am
Seasonal wrote:
Thu Aug 15, 2019 6:34 am
Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence inestors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
More broadly, it likely reflects their expectations of economic and market conditions and the Fed's reaction to those. If the economy is slow then there won't be much demand for credit, decreasing rates, and if the economy is slow the Fed will cutting or at least not be raising rates.

There's a global market, including for credit, so economic conditions and rates in the rest of the world have an impact on US rates.
I agree - global market for government bonds in particular (but not only). So the bet is one global markets are taking.

But narrowing it down, 10-30 year US Treasury bonds have become marginally more attractive relative to 10 year ones. The market is taking a view on what the Fed is going to do ie loosen not tighten.

What the Fed does is primarily based on its read of US conditions, because the US economy is so large and exports are a relatively small part of its GDP (again, a function of its size, mostly). It does consider international conditions but by and large they only matter to the extent they impact US economic statistics.
The Fed has tremendous influence, but so does the market. Each responds to the other. Both affect, and are effected by, economic conditions.

The Fed likely has more influence over nominal statistics than real statistics.

The Fed's mandate concerns US inflation and employment. As you write, international conditions are relevant (and have an impact on US conditions), but it's US economic conditions that drive the Fed's actions.

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Seasonal » Fri Aug 16, 2019 6:08 am

Here's a quote from a column published today by a very prominent economist "The Federal Reserve basically controls short-term rates, but not long-term rates; low long-term yields mean that investors expect a weak economy, which will force the Fed into repeated rate cuts."

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Call_Me_Op » Fri Aug 16, 2019 7:01 am

Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
Sounds like they haven't heard about Pascal's Wager.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Call_Me_Op » Fri Aug 16, 2019 7:04 am

Bacchus01 wrote:
Thu Aug 15, 2019 6:59 am
Valuethinker wrote:
Thu Aug 15, 2019 4:21 am
Wakefield1 wrote:
Thu Aug 15, 2019 1:52 am
I wonder what is driving these and especially 10 year rates so low? Is it lack of demand for credit?
The credit union where I have my cash stash just dropped their CD rates the other day,at least I have much of my cash in higher rate CDs that will last for a few months before expiring. No where near 10 year those CDs.
In essence investors think that the Fed will not be raising interest rates and so a locked in 10 to 30 year rate is relatively more attractive.
No. Investors believe there is a threat to equities in the short term, so they are fleeing to the safety of long turn returns. Fed rates play a part, but this is all about risk management. The alternatives are more risky than they would like, so flee to safer investments.
..,if you want to call the 30 year treasury "safer."
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Call_Me_Op
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Call_Me_Op » Fri Aug 16, 2019 7:11 am

stlutz wrote:
Thu Aug 15, 2019 10:52 pm
willthrill81 wrote:
Thu Aug 15, 2019 10:18 pm
In his latest episode of the Money for the Rest of Us podcast, David Stein argues that there is likely a global savings glut right now that is driving down yields on bonds and driving up stock prices, reducing expected future returns. I don't really know if that's true, but it sounds plausible to me.
There can't really be any such thing as a "savings glut". Savings is created by debt. If there is a savings glut then there must also be a debt glut. The sum of the left side of the balance sheet always equals the sum of the right side.
Indeed. But his point is still plausible if you change the term to "savings & debt" glut.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Dottie57 » Fri Aug 16, 2019 1:46 pm

TNOA wrote:
Thu Aug 15, 2019 9:11 pm
Dottie57 wrote:
Thu Aug 15, 2019 8:25 pm
SandysDad wrote:
Thu Aug 15, 2019 8:19 pm
I think in large part the decline in 10 / 30 year notes is due to foreign money flowing into US since many intl rates are negative.

I simply won't put my money in a negative yielding govt insured bond. But if the US follows europe I suspect banks may have to charge to hold my cash assets. What to do then????
Something like a CMA at Fidelity.
VUSXX still yielding 2% or thereabouts. How is this happening? I don't understand.
Because it holds assets paying 2%or above. Just new issue is at a lower rate.

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Phineas J. Whoopee
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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Phineas J. Whoopee » Fri Aug 16, 2019 4:11 pm

I think anybody here at http://www.bogleheads.org reasoning using Modern Monetary Theory, MMT, just like anybody reasoning based on the Austrian School of Economics, should out of basic courtesy say so at the beginning of their post. Both are very much non-orthodox.

That doesn't necessarily mean neither is true, although by my reading they are incompatible so no more than one of them can be true at the same time. It's also possible each is inaccurate.

It does mean readers, especially including lurkers, should be warned in advance.

PJW

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by willthrill81 » Fri Aug 16, 2019 4:20 pm

Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:11 pm
I think anybody here at http://www.bogleheads.org reasoning using Modern Monetary Theory, MMT, just like anybody reasoning based on the Austrian School of Economics, should out of basic courtesy say so at the beginning of their post. Both are very much non-orthodox.

That doesn't necessarily mean neither is true, although by my reading they are incompatible so no more than one of them can be true at the same time. It's also possible each is inaccurate.

It does mean readers, especially including lurkers, should be warned in advance.

PJW
Would you mind elaborating on why you believe they are incompatible? That could be an excellent topic for another thread.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by Phineas J. Whoopee » Fri Aug 16, 2019 4:40 pm

willthrill81 wrote:
Fri Aug 16, 2019 4:20 pm
Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:11 pm
I think anybody here at http://www.bogleheads.org reasoning using Modern Monetary Theory, MMT, just like anybody reasoning based on the Austrian School of Economics, should out of basic courtesy say so at the beginning of their post. Both are very much non-orthodox.

That doesn't necessarily mean neither is true, although by my reading they are incompatible so no more than one of them can be true at the same time. It's also possible each is inaccurate.

It does mean readers, especially including lurkers, should be warned in advance.

PJW
Would you mind elaborating on why you believe they are incompatible? That could be an excellent topic for another thread.
To cite one obvious example, Austrian School adherents are very much concerned about sovereign debt. Modern Monetary Theory dismisses debt in a currency the state controls as irrelevant.

I would hate to have instigated a debate between supporters of two incompatible irreconcilable views, both of which are far outside the economic mainstream.

Is that enough elaboration for you?

PJW

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by willthrill81 » Fri Aug 16, 2019 4:41 pm

Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:40 pm
willthrill81 wrote:
Fri Aug 16, 2019 4:20 pm
Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:11 pm
I think anybody here at http://www.bogleheads.org reasoning using Modern Monetary Theory, MMT, just like anybody reasoning based on the Austrian School of Economics, should out of basic courtesy say so at the beginning of their post. Both are very much non-orthodox.

That doesn't necessarily mean neither is true, although by my reading they are incompatible so no more than one of them can be true at the same time. It's also possible each is inaccurate.

It does mean readers, especially including lurkers, should be warned in advance.

PJW
Would you mind elaborating on why you believe they are incompatible? That could be an excellent topic for another thread.
To cite one obvious example, Austrian School adherents are very much concerned about sovereign debt. Modern Monetary Theory dismisses debt in a currency the state controls as irrelevant.

I would hate to have instigated a debate between supporters of two incompatible irreconcilable views, both of which are far outside the economic mainstream.

Is that enough elaboration for you?

PJW
That's adequate. Thank you.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 30 year treasury yield drops below 2% for the first time in history

Post by columbia » Fri Aug 16, 2019 4:52 pm

Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:40 pm
willthrill81 wrote:
Fri Aug 16, 2019 4:20 pm
Phineas J. Whoopee wrote:
Fri Aug 16, 2019 4:11 pm
I think anybody here at http://www.bogleheads.org reasoning using Modern Monetary Theory, MMT, just like anybody reasoning based on the Austrian School of Economics, should out of basic courtesy say so at the beginning of their post. Both are very much non-orthodox.

That doesn't necessarily mean neither is true, although by my reading they are incompatible so no more than one of them can be true at the same time. It's also possible each is inaccurate.

It does mean readers, especially including lurkers, should be warned in advance.

PJW
Would you mind elaborating on why you believe they are incompatible? That could be an excellent topic for another thread.
To cite one obvious example, Austrian School adherents are very much concerned about sovereign debt. Modern Monetary Theory dismisses debt in a currency the state controls as irrelevant.

I would hate to have instigated a debate between supporters of two incompatible irreconcilable views, both of which are far outside the economic mainstream.

Is that enough elaboration for you?

PJW

Some highly powerful folks have claimed both in their careers. 😀

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