10-year Treasury bond interest at a record low

I thought this chart was interesting.

Chart from the Wall Street Journal via Barry Ritholtz

Interest rates on 10-year U.S. Treasury bonds fell to 1.34 percent on Tuesday, the lowest in 225 years.  They bounced back on Wednesday to only 1.37 percent.

Bond yields of other governments also are low, with the UK, Germany and Japan at record lows.  Ten-year rates in Japan, Germany, the Netherlands and Switzerland are negative—that is, you get back less than you paid for the bond!  France offers 0.13 of a percent on 10-year bonds, Britain 0.91 of a percent.

What this means is that investors are fearful of future, and prefer the safety of government bonds, even at low, non-existent or even negative interest rates, than the risk of investing in the stock market.  Not a good omen!

LINKS

Why the 10-Year Treasury Yield Is at Record Lows by Steve Schaefer for Forbes.

Another Fed Fiasco: U.S. Bonds Fall to Record Lows by Mike Whitney [added 7/14/2016]

Why Interest Rates Are Lower Than Ever, and Why That’s Scary by Paul J. Lim for Money magazine.

10-Year Treasury yield hits record low by Adam Shell for USA Today.

Strong demand for UK gilts at record low yield by Elaine Moore for Financial Times.

History of U.S. Treasury bond interest since 1790

Double click to enlarge.

Source: Wealth of Common Sense (via Barry Ritholtz)

This chart is an interesting snapshot of American financial history.

It shows the interest rates on U.S. Treasury bonds from 1790, when they were first issued at a rate of 8.7 percent, through the third quarter of 2012, when they were at an all-time low of 1.62 percent.  As of this morning, the 10-year Treasury yield is 2.26 percent.

Why would people lock in their savings at such a low interest rate?  If they are foreigners, it could be because they have more confidence in the value of the U.S. dollar than they do in their own currencies.  Or it could be that they fear another financial crash that would wipe out the value of most stocks and bonds.