Yield History

The yield is below the 4.05 percent average over the past decade and the average of 5.48 percent when the U.S. was running a budget surplus from 1998 through 2001.

Treasuries yield about 0.7 percentage point less than the rest of the world’s sovereign debt markets, Bank of America Merrill Lynch indexes show. The difference has expanded from 0.15 percentage point in January and is the most since 1993, when the data began. July’s returns for Treasuries compare with 0.62 percent for the rest of the world.

In auctions of two-, five- and seven-year notes last week totaling $99 billion, indirect bidders, a class of investors that includes international central banks, bought 35 percent of the bonds, up from 30 percent in the June sales. Saudi Arabia is pumping oil profits into U.S. bonds even as China, the biggest foreign holder of Treasuries, slows purchases.
The Saudi Arabian Monetary Agency’s holdings of foreign securities rose 12 percent this year to a record 1.32 trillion riyals ($350 billion) as of June 30, central bank data show. HSBC Holdings Plc estimates a “large proportion” of those investments are in Treasuries. China’s ownership was $1.16 trillion as of May 31, unchanged from the end of 2010, U.S. government data show.

“The bond market wasn’t viewing this as that big of an issue and the Treasury is still the highest quality asset on the globe,” said Hank Smith, the chief investment officer in Philadelphia at Haverford Trust Co., which oversees $6.5 billion.

The bond market has a long history of accurately predicting the future. Economists use the relationship between short- and long-term yields to forecast the nation’s growth. Three-month bill rates have topped 10-year note yields eight times since 1960, with recessions following in six of those cases. There hasn’t been a recession that wasn’t preceded by an inverted yield curve in that period.