10-Year Treasury Note Yield Reached All-Time Low – Chart of the Day

Today, when U.S. stocks gave up nearly half of the gains from the past five trading days (the Dow lost nearly 680 points, more on the Dow crushes), Treasuries also suffered significant drop in yields. Among them, yield of 10-year Treasury note reached record low of 2.75% since the tracking began in 1962 as investors dumped equities after a 5-day rally.

What prompted the rise of U.S. Treasuries were report from Institute for Supply Management showing manufacturing activities in the country contracted the most in 26 years and comments from the Federal Reserve Chairman Ben Bernanke that the Fed may buy Treasury notes and bonds to push interest rate even lower as one way to combat recession and “spur aggregate demand” (BloggingStocks). When the Fed chief sounded a pessimistic note on the economy, investors ran for safety.

Is this a signal that the Fed will cut its benchmark interest rate again when they meet in two weeks to 0% if reports such as this Friday’s unemployment rate show that the economy keeps worsening? So far, it seems all the interventions from the government, stimulus checks, rescues, and bailouts, have failed to stop the economy from deteriorating. With the current Fed fund rate at 1.0%, there’s still room for another one or two rate cuts. But can a below-zero interest rate help to revive the economy?

BTW, the National Bureau of Economic Research today announced that we actually have been in recession for exactly one year already. No need of two consecutive negative quarterly GDPs to confirm that.

*Data source: Yahoo Finance

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