US Ultra-Short-Term Treasury Negative Yields... Safe Asset Preferences Changing Moment by Moment

[Asia Economy New York=Correspondent Baek Jong-min] A phenomenon where U.S. Treasury yields recorded negative (-) levels has occurred. Although this is limited to ultra-short-term bonds and the U.S. Federal Reserve (Fed) has been negatively evaluated for lowering the benchmark interest rate to negative levels, the market is paying attention as negative interest rates have become a reality in the U.S. following Europe and Japan. The preferred safe assets in the market also continue to change depending on the situation.

According to CNBC, on the 25th (local time) in the New York bond market, the yield on 1-month U.S. Treasury bonds recorded -0.05% during the session. The 3-month Treasury yield showed -0.03%. It has been four and a half years since these Treasury yields recorded negative levels, last occurring in 2015.

A decline in bond yields means a rise in bond prices. Negative interest rates mean that when purchasing bonds, investors do not receive interest but rather have to pay a premium.

While the yield on long-term 10-year Treasury bonds showed sharp fluctuations depending on changes in the preferred safe assets in the market, the yields on ultra-short-term bonds have continuously declined, showing strength.

Until last week, a sentiment prevailed that nothing could be trusted except the dollar, leading to a sell-off of safe assets such as gold and long-term Treasury bonds in the market. However, this week, funds are flowing into short-term U.S. Treasuries, indicating a shift.

On the other hand, most safe assets other than ultra-short-term U.S. Treasuries showed weakness on the day. The 10-year Treasury yield rose by 0.046 percentage points from the previous day to 0.864%. Gold prices, which had shown strong gains for two consecutive days, reversed to a decline of over 1%. The Dollar Index, which shows the value of the dollar against major currencies, also fell by about 1.3%.

Yahoo Finance reported that regarding the realization of negative interest rates in the U.S. Treasury market, U.S. President Donald Trump had been continuously demanding this from the Fed before the outbreak of the COVID-19 crisis.

This content was produced with the assistance of AI translation services.