Poor current yields on 10-year US Treasuries relative to equities suggest strong demand relative to supply, yet this does not square with other data showing US investors are still bullish on equities.
The suggestion of the latter is the US economy, which grew 6% since June 2003 in GDP terms, is set for more growth and continued improvements in corporate profitability. Evidence of this lies in still rising P/E ratios, with indices such as the S&P 500 going up. This suggest investors are not concerned about economic growth or the need to put money into less risky assets. However, strong demand for Treasuries is keeping yields lower than might be expected, and certainly lower than yields on equities. Factors explaining this seeming contradiction include strong Asian demand for US...
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