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A Global Yield Comparison

One of the most dominant themes in financial markets over the past several months has been the tremendous rally in sovereign bond yields. The rally in the United States has been the most curious, with the ten-year Treasury yield rallying near 100bp (see graph below) over the past several months and the thirty-year Treasury yield recently hitting new all-time low levels. This surprising rally has coincided with the end of quantitative easing - the purchases of U.S. Treasuries and agency mortgage backed securities by the Federal Reserve - as well as relatively strong economic results and a Federal Reserve who looks poised to lift short-term rates in late 2015. Long-term rates should be rising with higher forward expectations around short-term rates, but we have in fact seen the opposite, with the yield curve flattening dramatically.

Ten-Year Treasury Yield: Trailing One Year

(click to enlarge)

Source: Bloomberg; U.S. Treasury

Even if… Read More …