No Bull: Could the 10-Year Note Hit 1%?

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In the wake of Friday's disastrous jobs number, 10-year Treasury Note yields finally fell through the 1.5% level, trading as low 1.44% on the day.

That plunge took many traders, talking heads and politicians by surprise.

Our "leaders" in Washington D.C. were heard to say: "Nobody saw this coming."

Well, that's just not true. Not one iota.

If you've been reading Money Morning you saw this coming. So did tens of thousands of our Money Map Report subscribers.

I've been warning that 10 year yields would drop below 2% then hit 1.5% for more than 2 years now.

In fact, our readers had the opportunity to profit handsomely on our bond related recommendations that have earned them 30%-71% so far.

What does this mean for you?

First questions first...

Now that we've busted 1.5%, the next stop is 1%.

I can even see negative yields ahead, meaning that investors who buy Treasuries will actually be paying the government to keep their money.

Be prepared. I'm going to show you here what to do and - yes -how you can profit from this move-- even at this stage of the global financial crisis.

Why Bond Yields Will Continue to Fall

First off, 10-year yields dropping to 1% means several things:

  • Bond prices go even higher. Rates and prices go in opposite directions. Therefore when you hear that yields are falling, this means that bonds are in rally mode.
  • The world is more concerned with the return of its money than the return on its money. You can take your pick why. Personally I think it comes down to two things above all else: the looming disintegration of the Eurozone and the fact that our country is $212 trillion in the hole and warming up for another infantile debt ceiling debate instead of reining in spending.
  • More stimulus. Probably in the form of a perverse worldwide effort coordinated by central bankers as part of the greatest Ponzi scheme in recorded history.
But zero percent or negative yields - right here in the US of A?

Join the conversation. Click here to jump to comments…

About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. Rob Angle | June 5, 2012

    What about about high yield (junk) bond mutual funds

  2. rob | June 5, 2012

    Sure anything is possible but from a risk perspective owning bonds now is a fool's game, as the greater risk is rates increasing and the investor taking a bath on price of the bond. Take your $$ and run if you were smart enough to invest in long duration bonds. Investors are better off, owning high quality stocks paying a good divident that increases every year then bonds. 10yr at 1% is not a scenario investors or anyone should want all of us should be hoping for rate increases as that would mean the economy is doing better, rates of 1% is Japan economy and that we don't want !!! As of now there is no QE3 rates at 1.5% for 10yr is unbelievable going to 1 % will not help the economy. Only job creation, less regulation, smaller government and lower taxes will unleash the power of the American economy. what happens when the Fed stops buying? purchase 70%+ in 2011 of government debt, rates will go up and when 10yr is over 2% QE 3 kicks in and the ponzi scheme continues…Better to own hard assets then gov't bonds.

  3. lehman russ | June 5, 2012

    end of obama adminsitration

  4. Steve | June 5, 2012

    "the fact that our country is $212 trillion in the hole" Can you explain that statement?

  5. H. Craig Bradley | June 5, 2012

    Well, Keith is Right Again

    The implication of an as yet another unspecified central bank inpired stimulus is that risk assets such as stocks and commodties (gold) may rocket-up in response for a time as bonds ker-plunk downward. Of course, the million $ Question is: What will happen afterwards (following the Nov. Presidential election)? Many will speculate as the Fed telegraphs their next move. Once Obama has his his second term "in the bag" he will be totally unrestrained and won't care about the economy, despite talk otherwise. Ben Bernanke won't care much because he will be assured of reappointment under a second Obama term.

    One possible scenario of what could happen when the next stimulus effort fails ( they all have failed): stocks, commodities(gold), and even bonds will all roll over in turn as we go through a deflationary meltdown. (In deflationary, default risk increases). If I see 14,000 on the DOW Index or thereabouts and commentry from MSCNBC or CNN about an economic turnaround and strengthening recovery, then I will become very conservative and suspecious. (Most investors sound pretty conservative already if they will accept negative bond yields).

  6. H. Craig Bradley | June 5, 2012

    The implication of an as yet another unspecified central bank inpired stimulus is that risk assets such as stocks and commodties (gold) may rocket-up in response for a time as bonds ker-plunk downward. Of course, the million $ Question is: What will happen afterwards (following the Nov. Presidential election)? Many will speculate as the Fed telegraphs their next move. Once Obama has his his second term "in the bag" he will be totally unrestrained and won't care about the economy, despite talk otherwise. Ben Bernanke won't care much because he will be assured of reappointment under a second Obama term.

  7. Martin | June 5, 2012

    Many thanks, very helpful. I think you are right, but you are not alone: Robert Prechter has been forecasting negative interest rates for some years now…..especially for US T-bills. He thinks they are the safest place to be, along with cash in a very safe bank.

  8. yiehom | December 13, 2012

    I miss something in Americans' reasoning. You spend a billion+ each day on wars and can't see its effect on your deficits.

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