Bond market: Today the 10yr Treasury fell 28 basis points. How unusual is a fall like this?

Question

I am new to keeping up with bonds and this is the first that I have seen the 10 year treasury fall this much. How unusual is a drop like this? What are the potential effects on interest? Obviously the turmoil in the mid east was the cause of this and I dont see the situation easing up any time soon. Your thoughts please.

http://finance.yahoo.com/q/bc?s=%5ETNX&t=5d

Answer 1

Actually, the yield on the ten-year Treasury note didn't drop by 28 basis points in one day this week. If it did, that would be pretty extraordinary. It has been on a steady decline, though, from 5.22 on July 5 to 5.07 today (July 14). See the link below.

The yield on long-term Treasuries has been falling last week and this week for two reasons. First, there is an expectation among traders that the economy is slowing and that perhaps the Federal Reserve may be ending its "tightening" policy. Second, turmoil in the middle east has resulted in a "flight to quality," where some investors dump riskier assets in favor of relatively safe Treasury securities, driving prices up and yields down.

Answer 2

Prime in my opinion will going down. I think you're right about the turmoil in the mid east. In the next few days when Israel continues dropping more bombs, its makes for an uncertain market place. Safe investments such as bonds with the treasury will rise, causing an inverse relationship with the way the market moves. Watch the mortage rates the next few days, they typically lag the treasury by a few days, and will take a dip too.

Answer 3

it isn't that big a deal. it only reflects the market strength in the near term, anyway. A better barometer is the M1 and M2 and the direction of the long term interest rate market as a part of GNP (the true financial picture of the nation'sfinancial health), and not the GDP which hides the true financial health by not reflecting foreign investment and trade deficits. If you knew those, you would see how bad the nation's financial health is.