“We have a Treasuries yield curve that’s clearly reflecting that expectation of lower-for-longer rates, and is also clearly being influenced by global capital flows,” William Northey, chief investment officer for U.S. Bank’s private client group, told Bloomberg. “We’re receiving a lot of capital flows from around the world right now, which is influencing how low our rates have moved.”
Northey is referring to the increasing number of negative yield-generating bonds in international markets, which has caused many foreign investors to look into U.S. fixed-income assets as a better source of yield.
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For instance, the Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF recently attracted a $138 million block traded, representing more than 60% of outstanding shares, Bloomberg reports.
“Zeros do well in a rally, always,” George Goncalves, head of U.S. interest rates research at Nomura Securities, told Bloomberg. “They are a pure play on duration.”
For more information on the Treasuries market, visit our Treasury bonds category.