U.S. 5-Year Bond Makes History (TLT)
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Yields on bonds in the U.S. continue to make history. Today yields on 5-year bonds touched all time lows at 0.577 percent, lower than the previous record of 0.5884 percent on June 1, according to Bloomberg data. The benchmark U.S. 10-year yield fell four basis points to 1.45 percent after touching 1.4403 percent. It set a record low of 1.4387 percent on June 1.
The new low today came in relatively thin and calm markets. This contrasts the last time yields posted record lows, which came on the heals of a feared European breakup. This forced investors to scramble into the safe haven of U.S. bonds. Since then panic has subsided due to proactive efforts by the Europeans to shore up banks in Spain, although many fears remain.
A weakening economy in China is also forcing a flight to safety. Last week China GDP showed growth at 3-year lows of 7.6 percent.
On Monday, the Fed is scheduled to buy $1.5 billion to $2.0 billion in U.S. government debt that matures in Aug 2022 to Feb 2031 as part of operation twist, where it sells short-term securities and uses the proceeds to buy longer-term debt. Because it doesn't increase the size of the Fed's balance sheet, operation twist is a somewhat sterilized effort to spur growth. There is growing speculation that, considering deteriorating conditions in the U.S. economy, the Fed will launch into full-on quantitative easing. Investors will listen intently to Fed Chairman Ben Bernanke's comments when he goes before the senate finance committee tomorrow. Any clues regard QE3 will likely move markets.
iShares Barclays 20+ Yr Treas.Bond ETF (NYSE: TLT) is higher by nearly 1 percent today.
The new low today came in relatively thin and calm markets. This contrasts the last time yields posted record lows, which came on the heals of a feared European breakup. This forced investors to scramble into the safe haven of U.S. bonds. Since then panic has subsided due to proactive efforts by the Europeans to shore up banks in Spain, although many fears remain.
A weakening economy in China is also forcing a flight to safety. Last week China GDP showed growth at 3-year lows of 7.6 percent.
On Monday, the Fed is scheduled to buy $1.5 billion to $2.0 billion in U.S. government debt that matures in Aug 2022 to Feb 2031 as part of operation twist, where it sells short-term securities and uses the proceeds to buy longer-term debt. Because it doesn't increase the size of the Fed's balance sheet, operation twist is a somewhat sterilized effort to spur growth. There is growing speculation that, considering deteriorating conditions in the U.S. economy, the Fed will launch into full-on quantitative easing. Investors will listen intently to Fed Chairman Ben Bernanke's comments when he goes before the senate finance committee tomorrow. Any clues regard QE3 will likely move markets.
iShares Barclays 20+ Yr Treas.Bond ETF (NYSE: TLT) is higher by nearly 1 percent today.
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