All-time low in long bonds
The US 30-year hit 2.01% today -- a record low.
That is an extremely worrisome sign. It's the market flouting the Fed's credibility on inflation. Two percent is the FOMC inflation target and 30s being at that shows a market that believes they're not going to hit it now and they won't hit it in the long run.
The flipside of the argument here is that yields are being pulled lower because bond yields in Germany, Switzerland and Japan are negative or close to zero. We all laughed at the people buying bunds at 0% but those buyers are laughing now as yields have fallen to -0.62%. There's probably also a growing belief that QE4 is on the table and will come sometime in the next 30 years.
I'm sympathetic to all those arguments.
At the same time, the 30-year at 2% shows a world that's headed in the wrong direction, whether that's low growth or low inflation is hardly a comfort.
