Tags: Demand | Treasuries | Soars | Experts

Demand for Treasuries Soars, Defying the Experts

By    |   Tuesday, 23 Mar 2010 01:08 PM

Many experts predicted this would be the year of the bear for Treasuries, as the exploding U.S. debt burden and fears of inflation drove investors to other assets.

But that hasn’t been the case.

The 10-year Treasury yield has actually dipped 20 basis points so far in 2010, to 3.65 percent. (One basis point is equivalent to 0.01%, or one-hundredth of a percentage point.)

Remember that bond prices move in the opposite direction from yields.

The government has had little difficulty in finding buyers for the record amounts of bonds it is issuing — $2.1 trillion last year.

“They (the government) will not have any trouble," Bob Whalen, managing director of Tower Bridge Advisors, told CNBC.

"As long as they continue to keep short-term yields at these rates, it would not surprise me at all to see the government auctions go very well."

The Federal Reserve has pledged to keep short-term rates at record lows for “an extended period.”

Investors still view Treasuries as a haven at a time of turmoil in other government bond markets, such as Greece and the other poor stepchildren of the euro zone.

"It's a flight to quality. People believe in the resiliency of our dollar and of our economy," Larry Rosenthal, president of Financial Planning Services, told CNBC.

Recent mild inflation data also provide support.

“The inflation outlook is weaker than expected, and it’s very supportive of lower yields,” Thomas di Galoma, head of interest rate trading at Guggenheim Partners, told Bloomberg.

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Many experts predicted this would be the year of the bear for Treasuries, as the exploding U.S. debt burden and fears of inflation drove investors to other assets. But that hasn t been the case. The 10-year Treasury yield has actually dipped 20 basis points so far in...
Demand,Treasuries,Soars,Experts
247
2010-08-23
Tuesday, 23 Mar 2010 01:08 PM
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