I've got to tell ya, I'm getting pretty sick of reading all the 'insightful' comments from journalists who think the low Treasury bond yields are telling us something meaningful. The usual water carriers are saying that it's really an indictment of S&P etc, but that's simply ridiculous. So let me tell you once and for all what those low rates are really saying.
Right now, the largest holder of US debt (by far) is the federal reserve bank. The fed has unlimited resources for bond purchases, so no one dares bet against them. This means that the 'price' of Treasury debt does not reflect any information except that there is an actor in the market who has no need to generate a profit, has unlimited resources, and is placing all their bets one way in order to achieve a political goal. That's it.
The 'market' for treasuries is no market at all. It hasn't done the thing that markets are supposed to do for some time now. It no longer discounts relevant information, so there are no other conclusions you can draw from it. That's it. That's all it tells us. There is no great mystery. That market is simply broken.
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