Over the past few months, bonds have shown an improvement despite inflation soaring to a 13 -year high. Bond yields, which should have soared, have also stopped rising.
What happened?
While Federal Reserve (Fed) Chairman Jerome Powell also wondered about it when questioned earlier this morning in a press conference after the results of the FOMC policy meeting were announced.
10 -year treasury yields were down 1.7% to 1.22% following the Fed meeting, extending the decline from a one -year high it reached at the end of last March at 1.77%.
More surprisingly, the 10 -year real yield, considered by the market as a proxy for long -term growth prospects, fell to a new all -time low of -1.17%.
Powell said there are three possibilities that explain the decline, which was partly driven by a decline in actual yields as the contagion of the delta variant raised investors ’concerns over a slowdown in growth.
Moreover, it may also be due to expectations by investors that inflation is moderating, and lastly, technical factors. There are several investors who agree on the technical factors stated.
