Monetary Omens

Inflation protected treasury bonds (TIPS) sold today at negative yields for the first time ever. While this is good blog fodder for writers who tend to the apocalyptic, a sober man weighing the probability of immanent monetary apocalypse should note that yields on normal treasury bonds are also quite low (about 1.2% on the 5-year) so modest inflation expectations, say 2%, would be enough to push yields negative.

Still it is strange to see investors paying the Treasury for the privilege of taking their money. For this to happen expected returns on other asset classes have to be quite low, which is a bad sign for any economy.

Via Marginal Revolution

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