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How Low Can They Go?

November 28, 2012

Most analysts agree that today's low interest rates are due, in large part, to the Great Recession. That economic decline, and the subsequent lackluster recovery, reduced the demand (and thus the price) for borrowed funds. More recently, money flowing into U.S. Treasuries from distressed economies and currency regimes, like Europe, has pushed prices up and yields down even further.
-Mark Newlin, managing director of fixed income management, Mesirow Financial

ts no secret that interest rates are low. How low are they? Interest rates on United States Treasury securities are currently so low that to get yield that matches the current inflation rate you'd need a bond with at least 17 years to maturity. In other words, unless inflation declines, buying and holding a 10-year Treasury note may actually result in a negative real rate of return over the over the next 10 years and that's before taxes!

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