The American economy is relatively strong, making its assets more attractive to foreigners
by Cullen Roche
The greatest bull market in the history of markets keeps chugging along, as long-term bond yields continue their perpetual slide. As of Wednesday, the yield on the benchmark 10-year Treasury note was a mere 1.38%.
This is a bit confusing for some people because the U.S. economy seems to be in relatively good shape. Gross domestic product in the second quarter is expected to increase 2.4%, wages are growing at 3.4%, the ISM non-manufacturing number just came in at 56.5, jobless claims are at 40-year lows. Yeah, there are some worrisome trends out there, but the broader picture doesn’t seem to mesh with such low interest rates.
If we step back and look a the global picture, it all starts to make more sense. The U.S. bond market is stuck in a global vortex of 0% rates. Thanks to weak growth in China, Europe and Japan, global central banks have cut rates in an effort to spur growth.