Experts: Thank Greece for Super-Low Treasury Yields

Sunday, 20 May 2012 02:19 PM

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U.S. debt has never looked safer.

The yield on the 10-year Treasury hit a near-record low of 1.69% last week as fears that Greece will abandon the euro have sent investors looking for a safe investment to stash their cash. The yield hit a record low in September of 2011, when, like today, fears of a Greek exit from the currency zone were roiling markets worldwide.

Bond yields move opposite to price, meaning low yields reflect confidence in the bond as evidence by higher prices.

"Fear over Greece. Fear over Europe. We are viewed as a safe haven," says Bill Hornbarger, chief investment strategist at Moneta Group, according to USA Today.

Others echoed those sentiments.

"Uncertainty is what motivates people to buy Treasurys," says Gregory Whiteley, a portfolio manager who trades government securities at DoubleLine Capital, USA Today adds.

Uncertainty in Europe is sending investors selling stocks and commodities — assets that do better amid times of growth — in favor of U.S. debt.

"It's still seen as one of the safest investments in the world," says Guy LeBas, chief fixed income strategist for Janney Montgomery Scott, the Associated Press reports.

"If you compare Europe's problems to our problems in the U.S., it doesn't look so bad over here."

Greece has teetered closer to exiting the eurozone as evidenced by a recent failure among political parties to create a coalition government in a wake of Mary elections that thrust more fringe politicians into power critical of austerity measures tied to bailout money.

A new round of elections is scheduled for June 17, and many feel enough anti-austerity candidates will do well.

A rejection of austerity policies could lead to an end to rescue funding and open the door to a Greek exit from the currency zone, possibly tempting Spain and Portugal to follow suit.

Still, Europe's paymaster Germany insists austerity is the way to go for Greece, as better days will lie ahead once the pain of belt-tightening subsides.

"To tell the Greeks that they need not apply austerity deals to which they have agreed is to lie to them," German Finance Minister Wolfgang Schaeuble tells the weekly Bild am Sonntag, as reported by the AFP newswire.
"European solidarity is not a one-way street ... And then structural reforms in Greece are necessary in any case, there's no more 'we'll muddle through as usual'."

© 2014 Moneynews. All rights reserved.

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