Charts Predict Treasurys' Yield Will Sink to Zero
Investors looking for safe places for their capital are fast running out of options as US government bonds are set to see their yield sink to practically zero, Nicole Elliott, technical analyst from Mizuho Corporate Bank, told CNBC.
"We got our lowest weekly close in about 50 years (on the US 10-year T-bill yield). This is monstrous, this is truly dire straits and there is no other sensible place to park your money," Elliott said.
The benchmark 10-year note yield sank near to the five-decade low of 2.99 percent last week. The weekly close below the 3.8-percent mark signals a shift into a new era of even lower yield rates, Elliott said.
"Basically we're going to embrace zero interest-rate policy a la Japan," she said.
Investors have been driven to the relative safety of government bonds because of the darkening economic outlook and sharp declines in the stock market.
As more investors buy up the securities, the price is sent higher and the yield lower. The falling yield means investors will get less reward for holding the safe-haven assets.
"The monster is still coming closer and I've just about run out of ways of protecting myself," Elliott said while looking at the US 10-year yield chart. "I've got to about as far as I can by buying Treasurys … but I just can't think of what else to do."
Elliott expects the yield curve, which plots the varying yields on short and long-dated bonds, to flatten considerably.