As San Francisco Fed President Yellen explained in her well-timed speech yesterday, “the economy will continue to operate well below its potential throughout this year and next ... it seems quite possible that core inflation will move even lower this year and next.” You know what that means don’t you? No top-line momentum for the equity market and a low inflation anchor for the Treasury market (and by extension, the Canadian government bond market as well). It would not surprise us if we finished the year well below 3% on the 10- year Treasury note yield.
Bill: This is an 18% drop in yield, which means approximately a similar rise in price. Conventional wisdom
is that Treasuries are toast, yields will rise, etc, because inflation will go to the moon due to the US deficit. Rosenberg, Krugman, DeLong, etc etc say that there is no inflation in sight for a very long time.
Post a Comment