Why Treasury Yields Can’t Arrest the Freefall

The relentless fall in longer term U.S. Treasury yields doesn’t signal declining U.S. inflation expectations, but instead is a side effect of funds fleeing low yields elsewhere, say analysts.

“Yields of U.S. Treasury’s have actually become increasingly appealing relative to those of government bonds in other developed countries,” Capital Economics Chief Markets Economist John Higgins said in a note published on Thursday.

“Increased appetite from overseas investors” have contributed – along with the now-phased out asset purchases by the Federal Reserve and extra demand from banks in response to the launch of Basel 3 – to the downward pressure on U.S. Treasury yields, he said.


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