But the most interesting moves have been occurring in the global bond markets, where government bond yields have been plunging to historic lows.
“2015 starts off with the average of G3 10 year government yields below 1%,” wrote Steven Englander, Citi’s global head of G10 FX Strategy.
The G3 currency group is made up of the US dollar, the euro, and the yen.
On Tuesday, the US 10-year yield got as low as 1.959%, and Japan’s 10-year yield fell to as low as 0.288%. In the eurozone, the German 10-year yield got as low as 0.443%, and the French 10-year yield got as low as 0.720%.
“This is the first time ever that rates are this low, as even during the 1930s rates were well above current levels in both the US and abroad,” Englander added.
“It is also striking that this is not happening during the panic phase of a crisis, but after the panic is over and we have had significant recoveries in asset prices globally. More a sign that investors think we are going nowhere for a long time.”
The global economy is arguably fragile, but it’s hard to argue that we’re in the middle of any sort of panic.
“This could be secular stagnation but it could also be a policy impasse: fiscal policy/helicopter money may be the solution but policymakers are sticking to the conventional non-conventional tools and these are not expected to work terribly well,” Englander says.
Despite efforts to stimulate the economy, the eurozone has been stumbling. Inflation has been going nowhere, which has had experts warning of deflation in the region. This could explain the plunging yields.
DoubleLine Capital’s Jeffrey Gundlach ties surging bond prices and falling yields in the US to the ultra-low yields in Europe. Because yields are actually lower in Europe, US Treasury securities offer relative value to the global bond investor.
“It’s really hard for me to identify why rates should go higher,” Gundlach said to Business Insider in August.
In an interview with Barron’s last week, Gundlach said the US 10-year Treasury yield was likely to fall again in 2015, potentially sinking below the 2012 low of 1.38%.
Here’s a longer-term look at the 10-year yield.
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