FEB 2, 2018
Imagine this tempting scenario: You invest $1,000 of your hard-earned US dollars in the mighty 10-year US Treasury. In one year, your patience and investment savvy has paid off handsomely. You get back principal plus your return on interest: $990.
Investing money to lose money? It sounds laughable. Insane. But most European government 10-years have experienced negative 10-year rates within the last two years. Germany had them last July.
When extreme Fed measures (e.g.. the “emergency conditions” of a near-decade of near-0% interest rates) cease to work, you know what the Fed is going to. Resort to even more extreme measures, like helicopter money and negative interest rates.
In the next global downturn, US 10-year yields will converge totally with Japan and Germany. It will be another deep downturn because of the credit and asset bubbles that global quantitative-easing (QE) has pumped up.
Just like 2007, this is another economic boom fueled by an unsustainable credit bubble that will inevitably blow up with a rookie Fed Chairman [Jerome Powell] in place.
ORIGINAL SOURCE: SocGen's Edwards: 10-year Treasury yields will fall to -1% in the next recession by Tom Eckett at Investment Week on 2/1/18