BTIG’s Greenhaus: 10-Year Treasury Yield May Hit 1.5 Percent in 2012

Friday, 30 Dec 2011 08:59 AM

By Dan Weil

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Treasury bonds have enjoyed a 30-year bull run, and many market participants expect the rally to continue this year.

During the last three years Treasurys have benefited from investors looking for a safe haven. The 10-year Treasury note yield stood at 3.74 percent Sept. 12, 2008, just before Lehman Brothers declared bankruptcy.

Since then, the yield dropped to a record low of 1.67 percent this September, before rebounding to 1.88 percent Friday.

Ironically enough, the rally has come as economic fundamentals have deteriorated in the U.S. The budget deficit has exploded to more than $1 trillion a year, and the government debt burden has mushroomed to about 100 percent of GDP.

The 10-year Treasury note has notched a total return of 16.5 percent this year through Dec. 27, compared to less than 3 percent for the Standard & Poor’s 500 Index, The Wall Street Journal reports.

Many expect the safe haven effect to continue buoying Treasurys next year. The 10-year yield may drop to 1.5 percent if Europe's debt crisis keeps getting worse, BTIG strategist Dan Greenhaus tells The Journal.

To be sure, the paper’s poll of economists shows Treasury yields rising next year. But so did its poll a year ago.

If you’re an investor frustrated with low Treasury yields, you might consider blue-chip dividend stocks as an alternative. They offer you higher dividends than Treasurys, some safety, and a chance for capital appreciation.

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