Bond investors are backing Federal Reserve Chairman Ben S. Bernanke’s forecast that the U.S. will avoid another recession.
The economy has never contracted with the difference between 10-year and 30-year Treasury yields as wide as the current 1.35 percentage points, or 135 basis points, since the so-called long bond was first issued in 1977. The gap, which is more than double the 49 basis-point average of the past 20 years, has ranged from negative 56 to positive 41.9 at the start of the last five recessions, beginning in January 1980. The yield curve, as the gap between short- and long-term rates is known, shows that the market expects the economy to be strong enough to keep inflation from slowing, “and eventually Treasury yields will have to rise. http://www.bloomberg.com/news/2011-08-28/long-bond-shows-no-double-dip-in-yield-curve-five-times-average-since-1981.html '+'
