Why are U.S. bond yields so low? So much of the global debate these days is about this issue. Although most predicted rates would go up in 2014 - current Treasury yields for the 10-and 30-year issuances are at lows not seen since last June.

However, if you put this into a global perspective, the picture is a bit brighter. In comparison to Europe, U.S. yields actually look good. While U.S. 10-year rates dropped into the 2.4% range this week, German equivalent 10-year government bond yields are around 1.4% and French 10-year government bonds are yielding 1.7%. Dutch government bond yields are at 500-year lows!

Much of this has to do with a continued slowdown in Europe. Over the weekend, European Central Bank (ECB) President Mario Draghi again emphasized the risk of deflation in Europe and how tight credit lending by European banks is keeping the economy down.

At next week’s ECB meeting, Mario Draghi and his crew are supposed to announce some potentially dramatic monetary easing measures. Heightened expectations of lower interest rates in Europe have pushed the average eurozone government bond yields down to a 2.1%. International investors decided to stop putting more money there, prior to any solid announcement by the ECB. Consequently, much of that money has come to the U.S. Those investments in U.S. government bonds pushed our yields lower. The EUR also fell to a 3 ½-month low against the U.S. dollar, reflecting some of this shift.

My View: Talks of ECB's further monetary easing has ripped through the global bond markets, including the U.S. As long as the eurozone is threatened by deflationary fears, we will be facing chronically low long-term interest rates even in our monetary tightening mode.

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