Mish:
Two Year Treasury Yields Drop Below .5% First Time Ever; 30Yr/10Yr Spread Widens Again
Lets dig deeper, eh?
Two-Year Treasury Notes Drop to Record Low Yield.
Treasuries rallied, pushing two-year note yields below 0.50 percent for the first time, after the government’s payrolls report showed the economy lost more jobs in July than economists forecast.
“Everything you look at is much weaker and keeps the same pro-Treasury sentiment,” said Thomas Tucci, head of U.S. government bond trading in New York at Royal Bank of Canada, one of the 18 primary dealers that trade directly with the Fed. “There will be much more discussion about another round of quantitative easing.”
The 2-year note yield slid two basis points to 0.51 percent, extending its weekly drop to four basis points, after falling to the all-time low of 0.4977 percent. The 10-year note yield touched 2.8130 percent, the lowest since April 2009. The 5-year note yield dropped seven basis points to 1.50 percent after reaching 1.4851 percent, the lowest since January 2009.
“When you get down to 50 basis points on two-years, that’s giving you a signal that there’s not much left on the table,” Gross, founder and co-chief investment officer at Newport Beach, California-based Pimco, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “So the extension out on the yield curve is what we’ve been attempting over the past several weeks and the past several months.”
“We now have a combination of a weaker economy, no job growth, no inflation and possibly deflation, and it’s not getting better,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management Corp. in Jersey City, New Jersey.
“The market can try to continue to try to find reason why we are not Japan, but if it looks like a duck and quacks like a duck, why isn’t it a duck? Investors should stay long on Treasuries as rates can go even lower on the front and back end of the curve.”
That last comment kinda nails it, eh? Though, I must caution that the US is indeed not Japan, only. US demographics are more favorable, its khanomy is powered largely by domestic demand rather than foreign demand, and the USD is the reserve currency and all. Heck, what'll this do to a new carry trade in USD remains to be seen only. Expect tsunamis of dumb money to strike at SDRE economic shores.....
Meanwhile, the employment picture hopefully is nearing a bottom. But the chances are slim thta it is.
Underemployment 28.4% for Ages 18 to 29, 18.4% in all Age Groups - Gallup Poll
The percentage of underemployed Americans who are "hopeful" that they will be able to find a job in the next four weeks fell to 40% in July -- down from the better levels of May (43%) and June (42%).
And Mish chimes in:
Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time.
Expect to see structurally high unemployment for years to come.
Well, let's hope not. I predict a slow but steady protectionist backlash, esp after the nov polls.
Yumrika will move towards greater ekhanomic isolationism to bring jobs back. Jobs will soon become the #1 political issue despite netas, corporates and their media lackeys resolutely trying denial, diversions and delusions on overdose.
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