Tags: Gary Shilling | Treasury | yield | drop

Gary Shilling: 10-Year Treasury Yield Will Drop Below 2 Percent

By    |   Tuesday, 12 Nov 2013 04:55 PM

Treasury yields are on the rise amid signs of economic strengthening and talk that the Federal Reserve may taper its quantitative easing soon.

The 10-year Treasury yield reached an eight-week high of 2.79 percent Tuesday.

But Gary Shilling, president of A. Gary Shilling, a financial research and money management firm, remains an inveterate bond bull, as he tells Yahoo.

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The reason is inflation. He sees it falling or even turning negative.

"It really depends on your view of inflation and deflation. That's the greatest determiner of bond yields," Shilling said.

"Now we're at 1.2 percent inflation on the Fed's favorite measure." That's the core personal consumption expenditure deflator.

"The Fed wants 2 percent or higher. I think we're going even lower. The real risk is deflation," Shilling said.

He wasn't impressed with last week's data showing 2.8 percent GDP growth in the third quarter and a 204,000 payroll increase in October.

The GDP gain came largely from inventories, "which usually isn't a good sign," Shilling said.

"It usually means you're stuck with things you can't sell, and most of those [new] jobs are low-income."

Before last week, most economists didn't expect a Fed tapering before March. But now some say it may begin as early as next month.

“Tapering may not be as far in the future as initially thought,” Sean Simko, a portfolio manager at SEI Investments, told Bloomberg. “You had a couple of data points that were better than expected."

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Treasury yields are on the rise amid signs of economic strengthening and talk that the Federal Reserve may taper its quantitative easing soon.
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Tuesday, 12 Nov 2013 04:55 PM
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