As energy prices, shares and high yield risk corporate bonds continue their freefall today, the US dollar and US Treasuries are receiving strong ‘safe haven’ inflows. The North American yield curve is flattening in a bearish read on 2015 growth prospects.
Today the 10 year yield (shown below) has broken back below 2%, while the 30 year flirts with 2.5%.
Although the US Fed no doubt wants to raise interest rates in 2015 and declare desperate measures at an end, the weight of global debt, overcapacity and aging demographics is proving a crushing weight on inflationary dreams. Our insanely levered financial system is now reaping what reckless policies have sown. Stock and corporate bond prices are experiencing the sucking sound of inevitable capitulation in a de-leveraging world.
See: Banks-stock hopes must yield to bond-market reality for a good overview of the earnings compression all of this suggests for congenitally optimistic bank shares.
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