A day after Bill Gross said central-bank support limits the downside for long-term government debt, former Federal Reserve Chairman Alan Greenspan called the bull market in Treasuries unsustainable.
The yield on the U.S. 10-year note touched the lowest level in two weeks even as Greenspan warned it may rise in the long run to as much as 5 percent. On Wednesday, the Fed lowered projections for the path of interest rates, while the Bank of Japan shifted the focus of its stimulus to controlling bond yields. The actions prompted Gross, manager of the $1.54 billion Janus Global Unconstrained Bond Fund, to say he favors longer-dated sovereign debt.
“Whenever you have a bull market, it looks as though it is never going to turn,” Greenspan, the second-longest serving Fed chairman, said in an interview on Bloomberg Television. “This is a classic case of a peak in a speculative security.”
Investors globally have regarded monetary policy with growing skepticism that there’s more central banks can do to stoke inflation and economic growth. Asset-purchase programs and negative interest rates have pushed yields on more than $9 trillion of government securities worldwide below zero, according to Bloomberg Barclays index data. The European Central Bank triggered a global selloff this month after signaling it wouldn’t pursue further stimulus.
The yield on the U.S. 10-year note fell two basis points, or 0.02 percentage point, to 1.63 percent as of 2:36 p.m. New York time, according to Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 was 98 25/32.