2Y Treasury Yield Plunges To Record Low, Gold Spikes As NIRP Reality Dawns

With short-dated futures now signaling negative-rates, the Treasury curve is tumbling with the short-end breaking down to record lows.

That is below the lowest 2Y rate in US history…

Source: Bloomberg

And Nordea’s simple OLS-model has even started to ponder whether negative long USD yields could be the name of the game. It both sounds and looks far-fetched and we don’t really trust the below signal, which to a large extent is the result of an unprecedented low in the Global PMI, but none the less it showcases the growth-based downside pressure that long bond yields face.

Overall, we tend to think that the Fed will have to re-increase the daily purchase tempo to really reignite the global credit cycle, since USD scarcity will remain an issue (in particular in the EM space) unless the Fed outprints the US Treasury issuance.

And as rates re-plunge and negative rates resurge, gold is bid…