Guggenheim's Minerd Predicts 1% 10-year Treasury Yields

Feb 22 2016 | 7:15pm ET

By Jennifer Ablan (Reuters) - Scott Minerd, the global chief investment officer of Guggenheim Partners, said on Monday he sees the 10-year Treasury note yield falling to 1 percent, perhaps even lower, before the end of 2016.

"According to technical analysis, the current target bottom for the 10-year Treasury note is 28 basis points," Minerd told Reuters. "That may seem like voodoo, but technical analysis provided key insight to our macroeconomic team a year ago when we called for oil to hit $25 per barrel back when it was trading at $60."

Minerd said a barrel of oil at $25 or 10-year Treasuries yielding less than 50 basis points "may seem like crazy numbers, but so do the negative interest rates that we are already seeing in Europe and Japan."

The yield on the 10-year Treasury note was at 1.75 percent on Monday.

Minerd said: "As low as rates are today, I expect further declines in short-term and long-term rates, both in Europe and Japan, and that ultimately the Bank of Japan and the European Central Bank will take their respective overnight rates to as low as -100 basis points."

Such an event would likely cause Germany's 10-year Bund to trade at around -50 basis points. "When you consider that the current spread relationship between Bunds and Treasuries is about 150 basis points, you can easily see why the U.S. 10-year note at 1 percent is not that far-fetched," Minerd said.

Given that U.S. Treasuries have traded at yields lower than Bunds, it's not hard to imagine that the 10-year note could yield less than 1 percent if the Bund were to reach -50 basis points, Minerd explained.


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