Tags: Casey | interest | rates | Fed

WSJ's Casey: 'Super-Low Interest Rates Will Be With Us for a Long Time'

Tuesday, 19 Aug 2014 12:04 PM

By Dan Weil


Don't expect interest rates to rise any time soon, because global economic weakness will keep them near record lows, says Michael Casey of The Wall Street Journal.

"It's time to get used to near-zero savings-account interest rates and 10-year [Treasury] bond yields that don't get much higher than 3 percent," he writes.

The 10-year yield hit a one-year low of 2.3 percent last week and stood at 2.42 percent near midday Wednesday.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

The Fed may well hike rates as soon as next spring, Casey notes. "But even that won't produce the interest-rate 'normalization' that many assume to be on the way."

The culprit: "banks that remain reluctant to lend to Main Street, a looming debt crisis in China, and the alarming prospect that deflation will come to Europe's shores and return to Japan's," Casey writes.

That will make the Fed reluctant to follow-up its first rate hike with a second one, he argues.

"It isn't hard to imagine that first increase being followed by a six-month or even yearlong hiatus."

The central bank has kept it federal funds rate target at a record low of zero to 0.25 percent since December 2008.

"Super-low interest rates will be with us for a long time," Casey maintains.

Others see low rates ahead too. "The remarkable thing is the persistent decline in long-term Treasury yields," David Bianco, chief U.S. equity strategist at Deutsche Bank, told CNBC.

The 10-year Treasury yield stood at 3.04 percent Dec. 31.

"We're all kind of thinking any significant increase in interest rates is still a while away and increasingly believing long-term interest rates will stay well below historical norms, through the cycle," he said.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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