Sign of the Times: Two Year Treasury Yield at All Time Low
Aug 1, 2010
Posted by Jody Eisenman | Filed under Uncategorized
In another sign that the recession lives on, the yield on two year treasury notes fell to .546 per cent. This yield has now dropped for nine straight weeks. According to BGCantor Market Data, this is an all time low. Generally, low treasury yields are indicative of a flight to quality by investors who want safety, and/or to a low level of confidence in the economy. The Dross Domestic Product (GDP) grew at 2.4% annualized rate last quarter. This rate was 3.7% in the first quarter and 5% in the last quarter of 2009.This is not good news. With this lack of growth, the Fed will almost certainly keep rates low for the foreseeable future.
“We need 2.5 percent growth just to keep the unemployment rate where it is,” said Christina Romer, chairwoman of the president’s Council of Economic Advisers. “If you want to get it down quickly, you need substantially stronger growth than that. That’s what I’ve been saying for the last several quarters, and that’s why I’ve been hoping that we’ll please pass the jobs measures just sitting on the floor of Congress.”
Meanwhile, the equity markets had a good July. The S and P 500 ended up at 1101,or a rise of 7.23% for the month. Many market technicians believed that 1100 on the S and P was a key resistance level. Thus, they believed that a break on the upside would send the stock market much higher. Although we did break through, there wasn’t a great follow through. It would seem to me that although the market certainly looks healthier than it did a month ago, we need a strong rally to sustain the breakout. Next week’s jobs report might be crucial to the future direction of the market.
