U.S. bonds extended their rally through July aided by historically low Treasury yields and shaky equity markets, the tech sector aside. Since April, the 10-year Treasury yield traded between 60 and 80 basis points before breaking through the floor last week to levels briefly touched early March. The faltering economy was the prime mover as jobless claims and high unemployment along with falling demand from both consumers and businesses provided a bleak outlook for investors.
Though U.S. interest rates are still relatively high among sovereign debt yields, concerns abound over how much further rates have to fall, and if the U.S. will follow many of its global peers and issue negative yielding debt. Currently the 2-year Treasury is yielding 0.11% and has been relatively stable compared to longer-tenured issues.
Public pension plans can expect to feel the squeeze, as lower rates will drive up their liabilities. Additionally, the 20-year Treasury slipped below 1% this week.
