"FORGET THE NEAR-3% PLUNGE in stocks Friday or the 10-point collapse in consumer confidence in June. The important number to contemplate is 0.569%, the lowest yield ever attained by the two-year Treasury note.
Even though this is the most actively traded security on the planet, the two-year Treasury gets short shrift outside the inside-baseball world of bondos. That is undeserved, since the two-year note is an augury of future short-term interest rates. And its message is that money-market rates will remain depressed throughout its term.
What is extraordinary is that the two-year Treasury didn't reach its (thus far) nadir in late 2008, when financial Armageddon seemed at hand. It came last week, during the early days of the jolly time called earnings season, when—as in Lake Wobegon, where all children are above average—practically all earnings are "above expectations."
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