The Treasury market blasted through 2% today and hasn’t stopped. It continued through 1.90% on the latest push and down to 1.8852% at the low.
Even more impressive is that 5-years are keeping pace with yields there also down 12 bps on the day and at 1.44% with 5-year breakevens at 1.08%. Obviously the fall in oil prices is sparking disinflationary trading but there is also talk of endless foreign demand for Treasuries.
Technically, this will almost-certainly be the lowest close for yields since May 2013. On an intraday basis, the Oct 15 low of 1.86% is the next level to watch. That day, Treasuries only traded there for minutes as liquidity briefly evaporated in the market. Don’t rule out something similar today as sellers completely vanish.
US 10 year yields
The dive in yields is ostensibly bad for the dollar (especially USD/JPY) but not until the foreign flows into dollars stop.
The winner could end up being the Australian dollar where short term rates are at 2.50% and 2s at 2.18%. That helps draw a line under the long end and could begin to attract capital once markets settle down.