The U.S. Bond Market: Yields At Or Near Historic Lows

"Risk averse" funds have already been flowing to "safe haven" markets around the world, but the news that Italy has "shut down" some cities has helped accelerate the flows.
The United States bond market has been a major recipient of these funds and this flow has resulted in the yield on 10-year US Treasury notes reaching 1.37%.
What happens next is going to be all-important and must be watched closely along with anything the Federal Reserve might do, as the Fed indicated it is ready.
Well, so much for my forecast for the bond market in 2020. As usual, I set out my view for longer-term interest rates in the coming year and put out the call to “watch what the bond market does in 2020.”
My more explicit prediction in December came to this conclusion:
Yields on US Treasury securities should rise in 2020. Action over the past month may be just a picture of this happening. The yield on the 10-year TIPS has remained relatively steady, indicating that the foreign flow of ‘risk-averse’ funds have stabilized, while inflationary expectations built into the 10-year nominal yield have risen by 15 basis points from about 1.60 percent to 1.75 percent.
I don’t see the yield on the 10-year Treasury note returning to the 2.95 percent level it was at last year, but I think some movement toward 2.50 percent may be in the works for the year.
But, what has happened?
The yield on the 10-year US Treasury note, which was around 1.92% at the end of 2019, dropped to 1.37% at the close of business on Monday, Feb. 24, 2020.
For one, the coronavirus fear has taken over and the "risk averse" flows of funds have accelerated. I have alluded to this factor in an earlier post.
On Jan. 13, 2020, as a result of these flows, the yield on the 10-year TIPS at the close of the day was 0.060%, down from 0.125% on Dec. 31, 2019. This reflected the increasing flows that took place after the first of the year.
As the flow of funds... Read more