Salient to Investors:

Jim Vogel and Chris Low at  FTN Financial said:

  • Treasuries are years away from reverting to pre-financial crisis levels as growth remains weak and several hundred thousand people fall out of the labor force.
  • Yields will end 2014 at 2.55 percent versus the median estimate of 3.07 percent. Bloomberg show the consensus quarterly forecasts for 10-year yields made 12 months forward have overestimated yields by an average of 0.68 percent since January 2009.
  • Some of the growth we wish we could go back to was far more frail than most people realize.

Priscilla Hancock at JP Morgan Asset Mgmt expects the 10-year yield to end 2014 at 3 percent.

Jeffrey Gundlach at Doubleline Capital said the aging population, less spending, slower inflation and greater demand for low-risk, income-producing investments will keep yields low for years.

Jim Bianco at Bianco Research said traders are finding it too expensive to keep shorting bonds so are being forced to cover: he said growth is absent, and expects 10-year yields will fall to 2.25 percent in 2014. Bianco said the relationship between nominal growth and interest rates is not as strong as traders think it is.

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