The best investments or trades usually entail envisioning markets going to previously unforeseen levels and tying it to a coherent story line. Given the simple scenario outlined above, investors should become open minded to the potential for long-dated Treasuries continuing to rally. I can envision the 10-year note trading to a new low yield (below 1.38%) and even below 1%. I expect the yield curve to flatten viciously this year. I remain a bond bull and believe the 30-year yield will trade with a ‘one handle’ (i.e.; below 2%) in 2015. I could even be right for different reasons.
Personally I continue to expect US Treasury yields to fall into line with those of Japan and Germany. That means around 0.5% on the 10-year and under 1.5% on the 30-year.