10-Year Treasury Bond Yield Drops Below 3% For The First Time Ever

Earlier this week, the yields on the 10-year treasury bond dropped below 3% for the first time in its 46-year history, according to CNN Money. Falling interest rates are a result of higher bond prices, meaning investors have been poring money into U.S. Treasury bonds of late. Treasuries are generally considered to be the closest thing to a risk-free investment around and falling yields have serious implications for the broader economy.

Foreigners Regaining Confidence In The Dollar (At least relative to other currencies)

Theoretically, a rise in U.S. Treasury bond prices indicates regained confidence in the dollar by foreigners. This would usually be seen as a good thing; however, in this situation it could just be a result of foreigners trusting other currencies even less. That doesn’t speak well for the global economy.

Indicates Just How Dire The Economic Picture Is

That the 10-year yield is this low indicates the market thinks this is the worst economic crisis in the bond’s 46 year history. The outlook becomes even more bleak when you consider the sub-3% yield is less than the inflation rate. That many investors are willing to readily accept negative real yields over a 10 year period is troubling.

Shows A Lack Of Confidence In A Speedy Recovery

With long-term yields this low, it’s a good bet the market places the odds of a strong, speedy recovery as tiny at best. At under 3%, even a modest recovery and the accompanying rise in interest rates would wipe out any profits. Investors clearly don’t expect that anytime soon.