Chart of the Day: Bond Yields Hit New Lows

Today's chart shows the continual move lower in bond yields. A couple of months ago I highlighted the bounce back to the overhead 50-day average (blue line), and the failure to break above that resistance level.

The 10-year yield has since come back down to test its August lows, near 2.47%. Today, bond yields fell further and the 10-year yield ended at new lows for the year - 2.45%.

Part of this is likely due to the accommodative stance on the part of the Fed, who said they are likely to continue to purchase bonds in the open market to help keep interest rates low. Bond traders are well aware of this, so they have little incentive to sell their bonds at current levels, since a big buyer waits in the wings.

Many pundits keep talking about inflation being right around the corner, but this picture sure doesn't lend itself to the notion of imminent inflation. I am not in the deflation camp either, but I think a more likely scenario at least for the near-term is for the markets to continue in this disinflationary environment.

Higher bond yields? Check back in 2011...

long TBT