After Treasury bond prices slumped in the first six months of the year, some investors proclaimed that the 27-year Treasury rally was over.
Now they’re starting to change their tune.
After reaching an eight-month high of 3.90 percent in June, the yield on 10-year Treasury notes has dropped to 3.35 percent.
Worries about the stubborn recession are driving demand.
“You are starting to hear more concerns about how well the economy is doing,” Michael Materasso, co-chairman of fixed-income policy at Franklin Templeton, told Bloomberg.
Last month, jitters about the record onslaught of Treasurys that will come to market thanks to the exploding deficit scared investors away.
Barclays estimated the government will issue $1.1 trillion more paper by year-end, adding to $963 billion from the first half, Bloomberg reported.
But all the weak economic data in recent days, particularly the 467,000 job losses reported for June, brought those wary investors back to the market.
The sluggish economy has helped quell concern about inflation, too.
“The economy still faces pretty fundamental headwinds from the employment situation and the inflation picture,” said Stuart Spodek, co-head of U.S. bonds for BlackRock.
Others are bullish on Treasuries, too.
"All those 'green shoots' guys realize they were too optimistic" about the economy, Tom Tucci, head of Treasury trading at RBC Capital Markets, told the Los Angeles Times. "The reality of 'lower (Treasury yields) for longer' has caught investors offside."
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