Treasury bonds and related exchange traded funds have been on a tear as the yield on benchmark 10-year Treasury note dropped to its lowest level ever Wednesday.
The Treasury market has strengthened, with yields on benchmark 10-year notes hovering around 1.38% after trading as low as 1.321% Wednesday. Bond prices and yields have an inverse relationship, so falling yields correspond with rising prices.
Now, fixed-income observers are eyeing the 1% mark as further volatility could potentially push yields even lower and help support an extended bond rally.
“If the global and U.S. [economies are]pulled down by Brexit, then yields have room to fall, and potentially we could see 10-year U.S. yields below 1%,” Jae Yoon, chief investment officer at New York Life Investment Management, told the Wall Street Journal.[related_stories]
Alternatively, Yoon believes yield could climb back above 2% if the United Kingdom and the European Union make “an amicable divorce,” work out trade issues and assuage market fears.