Tags: Treasury | yields | confound | predictions

Falling Treasury Yields Confound Predictions

By    |   Sunday, 02 Feb 2014 02:03 PM

Conventional wisdom had it that Treasury yields would rise this year amid the Federal Reserve's tapering of its quantitative easing.

But it hasn't worked out that way. Instead of selling Treasury securities, investors have bought them, pushing the 10-year Treasury yield down to a 12-week low of 2.66 percent Friday. The yield stood at 3.04 percent Dec. 31.

Buyers include Pimco's Total Return fund and BlackRock, The Wall Street Journal reports.

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The recent upheaval in emerging markets has left investors searching for the safety of Treasurys.

"The overarching theme is the risk aversion that’s coming from the emerging-market situation," Robert Tipp, chief investment strategist for Prudential Financial fixed income, told Bloomberg.

The Fed has signaled "this taper’s going to go through regardless of emerging-market volatility and marginally softer data in the U.S.," he said.

What a difference a month makes.

"Many of the bond-market dynamics this year may be distinctly different, in fact almost the opposite of what happened in 2013, and you have seen that playing out somewhat this month," Rick Rieder, co-head of Americas fixed income at BlackRock, told The Journal.

The January rally has been strong enough that some bond market participants are lowering their year-end forecasts for Treasury yields.

Michael Swell, co-head of global portfolio management at Goldman Sachs Asset Management, told The Journal he now sees the 10-year yield closing 2014 at 3.5 percent to 3.75 percent, down from 3.5 percent to 4 percent previously.

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Conventional wisdom had it that Treasury yields would rise this year amid the Federal Reserve's tapering of its quantitative easing. But it hasn't worked out that way.
Treasury,yields,confound,predictions
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2014-03-02
Sunday, 02 Feb 2014 02:03 PM
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