Demand for U.S. Treasuries Remains Strong

February 18, 2020

Demand for U.S. Treasuries Remains Strong Photo

The demand for U.S. Treasury securities remains strong. As a result, yields continue to move lower despite decent economic growth, stable inflation and increased supply. Treasury securities will likely remain in high demand for the foreseeable future as they continue to be the global safe-haven asset of choice. With the 30-year bond now trading with a yield below 2% and 10-year yields closing in on 1.5%, yields have fallen by almost 150 basis points over the last year and a half.

The recent rally has come at a time when demand has been strong due to the uncertainty around the impact of coronavirus and the belief that economies will be aggressive to utilize monetary and fiscal stimulus to offset any impact. Last weekend’s announcement from Apple that it will demonstrate a material impact from the virus in this quarter’s results only adds to the uncertainty. The demand for U.S. assets, both stocks and bonds, continues to drive outperformance versus other global markets. 

I expect Treasury yields to remain in strong demand, and I don’t see a significant rise in yields in the next several months. I will be watching closely to see how global negative rate policies evolve and what impact that will have on the U.S. in the medium term.

Tags: Coronavirus | Treasury yields | U.S. Treasuries

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This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

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High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

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