THE yield on the ten-year Treasury bond fell to 2.13% on August 28th, after North Korea fired a missile over Japanese territory. Investors tend to buy government bonds when they feel risk-averse. That will have come as a surprise to those commentators who have called the bond market a “bubble” that is sure to burst; one British magazine made this a cover story back in September 2001. Every time the ten-year yield falls close to 2%, press references to a bond bubble seem to increase (see chart; the yield is inverted).
It is not just the press. Investors have been cautious about bonds for a while; the vast...Continue reading
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