Greenspan Can’t Rule Out Negative Rates on 30-Year U.S. Bonds
Greenspan Can’t Rule Out Negative Rates on 30-Year U.S. Bonds
(Bloomberg) -- Just before leaving work early on his 94th birthday Friday, former Federal Reserve Chairman Alan Greenspan gave a stark reminder of just how weird the U.S. Treasury market has gotten.
Yields on 30-year bonds, he said, could go negative, joining more than $14 trillion of debt worldwide that already sports a rate below zero.
The long bond’s yield went into free fall Friday, plunging as much as 36 basis points to a record low of 1.18%. Greenspan’s former employer, the Fed, tried to stem the virus-inspired pain earlier this week, announcing its first emergency rate cut since the 2008 crisis. It didn’t work: The 30-year yield ended at 1.72% on Monday, the day before the central bank took action.
“We were getting very significant declines in the 30-year yield even before the virus, as people are living longer and searching for ways to invest over that period in securities that seem secure,” Greenspan, who led the central bank from 1987 to 2006, said in a phone interview. “There’s really not a limit on how low the yield can go, even zero is not a limit. A negative rate is possible.”
To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker
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