I can give a myriad of reasons why I don’t believe this will happen, but I thought this simple demonstration was quite powerful. Below is a list of 10yr sovereign bond yields for major countries around the world. Let me point a few out, look at France at 2.572%, Italy at 3.925%, Spain at 3.802%. These three countries in particularly are staying straight down an economic abyss. Citizen confidence levels in each of these counties have cratered since 2008 to levels not seen any time in the recent past. Unemployment, particularly youth unemployment, have been skyrocketing reaching new highs each month. Spain’s 10yr got as high as 7.621% in 2012, and now it’s at 3.802%, and things have only worsened in that country. With that said, there is just no way US treasury yields are going to climb any closer to that of these countries. And I also believe that’s why every time the US 10yr hits 3.00%, buyers come in and bring that yield right back down. AND, you just wait until a crack appears in Europe, which I believe it will. Sooner or later, the realities in Europe are going to service, and there is going to be massive selling in European debt, and it will all come this way to the US.
I’m obviously an outlier, but if/when the “catalyst” comes, I think we’ll test 2% on the US 10yr again. And I think it could come this year.
Randy Woodward
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