Heading to Zero? Yields on benchmark U.S. government notes have rapidly fallen to historic lows The Federal Reserve has a lot to worry about these days. And while it's not often mentioned, at the top of the list should be preventing rates on longer term U.S. Treasuries, the world’s risk-free benchmark securities, from falling to zero. https://www.bloomberg.com/opinion/a...al-reserve-can-t-let-bond-yields-fall-to-zero
For day traders, this message will be written as: Bond volatility to continue? Volatility on benchmark U.S. government notes have increased rapidly recently. Days traders have a lot of opportunities to trade bonds (and hence profited from it) these days. And while it's not often mentioned, longer term U.S. Treasuries, the world’s risk-free benchmark securities, have greater volatility than shorter term US Treasuries.
Ultra-low yields on Treasuries will be a slow-moving global financial earthquake - until now, they still offered global investors some scraps of risk-free return. In the years to come, we can expect new heights of bipolarity and schizophrenia in markets. Yields on stocks, bonds and real estate will be driven to clear bubble levels that can't be remotely justified by any fundamental risk-return analysis, only by comparison to guaranteed 2%+ annual inflation losses on cash. Governments will be forced to buy a wider and wider array of assets, in larger and larger quantities, after smaller and smaller declines or bouts of volatility - "portfolio insurance" provided by central banks, guaranteeing the accumulated fortunes of the rich. I suspect the ultimate endgame is an array of new taxes on capital, estates, wealth, financial transactions etc. to keep things in balance by stealth confiscation and redistribution, rather than market based mechanisms (including price declines, investment losses etc) as in the past.
I don't understand finance so here is the thing: Isn't that good for the USG? Negative 10 years, negative 30 years. USG can issue bonds to replace all their current debts. Instead of paying back with interest, get paid so in theory eventually the debt goes to zero by itself. How not to like?