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Plunge In Treasury Yields Defies Easy Explanation – Still, It Happened

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Many commentators are fixated on the Federal Reserve, and make convoluted comparisons to the 2013 taper tantrum. Only this time, they say, investors are anticipating the decline in yields that came when the Fed started reducing its bond purchases and already have the tantrum spike behind them in the first quarter.

Perhaps. A more obvious explanation is that President Joe Biden’s ambitious spending plans are encountering severe headwinds in Congress, throwing into doubt whether any additional spending will materialize beyond the trillion-dollar bipartisan infrastructure plan, if that.

Or that COVID variants and lagging vaccines may lead to new waves of infection and slow down the recovery. Or that the growing likelihood of persistently high inflation is causing talk again of the dreaded stagflation—slow economic growth combined with high inflation. Or the always useful “technical factors” as investors rebalance their portfolios.

Yield on the benchmark 10-year Treasury plunged at one point to 1.25% last week, after hovering around 1.5% for much of the past month. It has since recovered to about 1.37%, but you no longer hear talk of it cresting 2% before the end of the year.

Those who bet against the consensus of rising yields are looking good, and appear vindicated in their

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