Treasury Bond Investors Signal Bad Times Ahead

“A collapse in real yields — the return that bond investors can expect once inflation is taken into account — is rippling through global financial markets and driving record rallies in assets from gold to technology stocks,” the Financial Times reports.

“The yield on 10-year inflation-linked US government bonds, known as Tips, sank below minus 1 per cent last week to a historic low, as investors bet that a surge in coronavirus cases would prolong the damage to the world’s biggest economy — and that the Federal Reserve’s efforts to stimulate demand could stir inflationary pressures.”

“The deeply negative Tips yield implies that large chunks of the Treasury market are expected to lose investors money, in real terms, over the next decade.”