The long end of the Treasury inflation-protected securities yield curve fell to an all-time low last week. The yield of the April '32s fell to 1.72% on Feb. 8, the lowest since the issue was released in 1998. Alex Li, interest-rate strategist at Credit Suisse First Boston, said he considers the drop surprising given the Federal Reserve continues to raise interest rates, but sees the buying of longer-dated paper by pension managers trying to match assets and liabilities as a major factor in driving up prices on the issuance (BW, 2/4).
The yield of the April '32s hit a high in 2000 of 4.4%. Over 2004, yields on the issuance stayed within a range of 1.9% to 2.5%.
Other interest-rate strategists say the falling of the TIPS curve follows the general trend of curve flattening. "All long securities are falling in yield. Long principals blasted through previous all-time low yields," said one TIPS strategist.
The new low was partly caused by the market's rally on Feb. 4 after the nonfarm payroll data was released but is also a sign of reduced growth expectations by market participants. "It's a reflection economic growth over the long term will be slow," Li said.
