- Stocks turned up this week, reversing some of their May losses as U.S. Treasuries continued their recent strong run. The 10-year Treasury yield fell another 6 bps this week and sits approximately 60 bps lower than where it began the year.1
- U.S. Treasury yields’ YTD decline generally mirrors that of other major developed economies as global central banks have increasingly adopted either a patient or dovish approach to monetary policy as economic data decelerates this year.
- Against this backdrop, the yield on government debt has fallen back into negative territory in Japan, Germany, the Netherlands and Switzerland.1 As the chart shows, the dollar value of negative-yielding debt globally has grown rapidly since Q4 2018 and is approaching the all-time high of approximately $12.2 trillion reached in June 2016.1
- Amid rising trade tensions, increased market volatility and the prospect of slowing economic growth, investors increasingly expect that the Fed will cut rates at least once this year. Two major Wall Street banks recently called for multiple Fed rate cuts in 2019, and central banks in the U.S. and eurozone have given credence to the recent rate cut talk.
- With the direction of monetary policy in flux as well as the potential severity of a global economic slowdown in question, much remains uncertain at the moment. Among the only certainties that investors may be able to expect are difficulties finding competitive levels of income combined with continued bouts of volatility.
1 Bloomberg, as of June 6, 2019.
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