Art Cashin: US Treasurys 'Screaming' Deflation

Two-year US Treasury note yields dropped to an all-time low amid talk of European spending cuts and fears of a US double-dip recession. Art Cashin, director of floor operations at UBS Financial Services, and Bernard McSherry, senior vice president at Cuttone & Co., offered CNBC their market and economic insights.

"Cutting back stimulus, all these austerity measures, goes against the grain of traditional economic theory," said McSherry.

He cited a "similar mistake in 1937" in America, as well as "Japan in the '90s."

"We've been worried about inflation, but I'm more worried by deflation."

Cashin agreed.

He pointed to "bad data" on a global scale, especially coming from China, Japan and "Spanish banks." And that international agglomeration of gloom affected US bonds — which are, in turn, sending their own sobering message, he believes.

"The 10-year is below 3 percent. I think that's kinda screaming, 'Look out for deflation,'" Cashin declared.

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Disclosure information was not available for McSherry, Cashin or their respective companies.