Late last month I wondered if lower yields were signaling higher risk? The question still resonates. Indeed, the benchmark 10-year Treasury yield is under 2.50% again, or near the lowest levels for the past year. This is a bit odd because US economic data continues to trend positive, although the housing sector still looks wobbly. Nonetheless, nonfarm payrolls and other major macro indicators betray no conspicuous warning signs at this time. In turn, the moderately upbeat profile on the economy suggests that the Fed will continue to wind down its quantitative easing program in the autumn, which lays the groundwork for raising interest rates next year. But there are risks bubbling around the world that are weighing on interest rates and so demand is rising for a safe haven in the world’s reserve currency.
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