The year of the shrinking bond yield

So far, 2016 has been the year of the shrinking bond yield. Today, yields on ten-year Treasury-notes closed below two percent.

The question now: Why is everyone buying these ten-year bonds? And why are they okay with shrinking yields?
“Fear on wall street is on the rise,” said Michael Farr, CEO of Farr Miller and Washington. “When fear increases, people head to safety.”

For starters, there’s the overall dismal performance of the U.S. stock market; some brokerages have told investors to sell off stocks and cling to high-quality bonds. And there’s plenty of fear abroad. “Emerging markets are fragile,” said Morelock.

The downward movement of ten-year yields means “the market is revising downward its expectations of how much the Fed will be raising rates,” said Joseph Gagnon, an economist with the Peterson Institute for International Economics.
“The market’s saying ‘ooh the world looks scarier than we thought so the Fed will probably not be raising rates as much as we thought,’” he said.

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