The benchmark 10-year Treasury note yield briefly breached the 4.5% level this past week, which was widely noted to be the highest level since 2007. That makes it seem as if this were something extraordinary. In actuality, it represented nothing more than a return to normalcy.
But that’s after stunning losses in supposedly “riskless” government securities, some of which sell at less than 50% their face value. With a nod to our Deadhead central bank chief, what a long, strange trip it’s been—and a bad trip for those who own the 1.25% Treasury bonds due on May 15, 2050, which closed on Thursday at a price of 48.186, more than half off their original price just over three years go.
That’s based on economic projections that envisage continued growth and a further easing in inflation with a smaller uptick in unemployment than previously anticipated for next year, a fortuitous combination characterized as “aspirational” by J.P. Morgan chief economist Bruce Kasman in a Bloomberg television interview.