Report

US Treasury bonds as high yield securities

If the yield on a government bond can be read as an indication of the preceived risk of holding the asset - both the risk of default, and the risk of inflation eroding the value of the bond, then one might expect the US to sit near the top of the tree, as ideed it did until 2012. Barring some technical (debt-ceiling related) disruption to the ability of US government to honour its obligations, surely Treasury debt is risk-free? As for inflation risk, the investment community remains supremely confident that the US problem is too little inflation rather than too much.  So why is the US 10-year bond trading on a yield so much higher than any other developed economies?

 

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Economic Perspectives
Economic Perspectives

Economic Perspectives is a trusted provider of global macroeconomic and financial research with clients in North America, Asia and the UK.

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Analysts
Tom Traill

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