Reply #72: Treasury Yields Fall to Historic Lows as Stocks Plunge

[Demeter]

http://online.wsj.com/article/SB10001424053111904070604576516813690467664.html?mod=dist_smartbrief

For at least 50 years, the 10-year U.S. Treasury note yielded nothing lower than 2%—until Thursday. The yield sank to 1.9872% in early trading on Thursday, the first time it has hit that level since at least the 1960s, based on St. Louis Federal Reserve records. Before that, comparisons become murky....While 10-year yields later rose above 2%, their foray below that level underscored the fact that investors, consumers and financial institutions increasingly find themselves in a new world of rock-bottom interest rates that has profound implications for public, corporate and personal finance.

"I think what the bond market is telling you…is that returns over the next couple of years are going to be significantly lower than they've been over the last 10, 20 years," said Rick Rieder, chief investment officer of BlackRock Inc.'s actively managed fixed-income funds, with $604 billion under management. "It's certainly suggestive of an economy that's significantly slower than people thought it would be at this point."

Roger Ibbotson, a professor at Yale School of Management, traces 10-year yields back to the 1920s and says the 10-year has been above 2% since April 1950. It reached its lowest point in April 1942 of 0.92%, he says....Since peaking this year at 3.725% in February, the yield on the benchmark 10-year note—a key rate that tends to guide moves in consumer rates such as mortgages—has collapsed by more than 1.60 percentage points, according to Thomson Reuters data....