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Anyone care to explain what’s going on with the 10-year treasury bond?

edited March 1 in Other Investing
It’s at 1.72% 1.70% currently, which is lower than it was a year ago Now, how do you reconcile that rate with (1) 7%+ inflation and (2) Fed members’ statements to the effect they’ll be hiking the overnight lending rate by .25 to .50% at their next meeting later this month? On the second score, I do understand that those Fed projections were made before things in the Ukraine heated up. But I’m befuddled by the contrast between the documented year-over-year rate of inflation and the meager pittance investors seem willing to accept from a bond over the next 10 years.

ISTM inflation would “eat you alive” over 10 years should you own that bond - even if we lower the inflation expectation to 3-5% yearly, which is closer to what most observers are forecasting. Yes, it could be a gamble, with folks expecting to unload their bonds in the near future after some capital appreciation. But that 1.70 rate just doesn’t make sense to me any way you cut it.

To “pun it” - If saving to buy a new pickup truck (now selling for $70,000 +) you’d surely be “spinning your wheels” while holding that 1.70% bond.:)

Chart: https://www.cnbc.com/quotes/US10Y

PS - Had to edit post. Bond fell below 1.70% while I was writing.

Comments

  • In stress time like now many investors turn to US dollar and treasury.

    Emerging market bonds, EMB and LEMB (local currency) are down 1.5% while 10 Y treasury price is up. Today treasury yield are falling…
  • USD and bonds considered "safe haven" investments. Investors will skim off some capital gains from rising bond prices and move on to the next investment !
  • edited March 1
    Just a flight to safety. Real-time 10-yr yield is in this chart below (rate scale 10x in the main panel). The bottom panel for 10Y-2Y spread (EOD) is with regular scale.
    https://stockcharts.com/h-sc/ui?s=$TNX&p=D&b=5&g=0&id=p95118878123
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