Tags: Treasury | market | Fed | economy

Treasury Market Continues to Overcome Bearish Calls

Tuesday, 07 May 2013 07:56 AM

By Dan Weil

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For four years, some bond experts have been saying that Treasurys are overvalued and that the now-32-year bond rally is ending.

But Treasurys themselves are having none of it. The 10-year Treasury yield stood at 1.77 percent Monday, slightly lower than last year's close of 1.78 percent and far below the post-financial crisis peak of 4.01 percent set in April 2010.

Among those who have been forced to reverse their negative forecasts are Pimco co-CIO Bill Gross and Rick Rieder, managing director of BlackRock.

Editor's Note:
Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

The supporting factors for Treasurys are an economy that is growing only in fits and starts and a Federal Reserve that has been easing relentlessly, The Wall Street Journal reports.

The economy grew a lower-than-expected 2.5 percent in the first quarter after an expansion of only 0.4 percent in the fourth quarter.

Meanwhile, the Fed has made clear it will continue to purchase $85 billion of Treasurys and mortgage-backed securities a month.

"It's not timely to be betting on higher interest rates," Jeffrey Gundlach, CEO of DoubleLine, told The Journal. Rates won't rise until the Fed starts curbing its quantitative easing, he added.

To be sure, the 10-year Treasury yield stands at a three-week high after Friday's strong employment report, so it doesn't look like a rally is imminent.

That news "reduced some of the pessimism about the U.S. economy," Ian Lyngen, a government-bond strategist at CRT Capital Group, told Bloomberg. “We’re now in the process of redefining this new, slightly higher yield range.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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