Bond guru Gary Shilling thinks the 10-year Treasury yield is heading to 1% (TLT, TLO, USD, DXY)
Screenshot via Bloomberg TV
Gary Shilling is talking about bonds again.
This time in an interview with Bloomberg's Andrea Wong, Shilling — who was Merrill Lynch's first economist in the 1980s — is repeating his forecast that the benchmark 10-year yield will fall to 1%.
The record low on the 10-year yield was 1.38% in July 2012.
Shilling holds a "this time is different" argument for maintaining this call.
He says that unlike what usually occurs in regular cycles, we're seeing the combination of negative interest rates around the world, China's economic challenges, and low global demand.
And this will send investors rushing into the safety of US government debt, pushing up bond prices and lowering yields.
In October, Shilling said the 30-year bond could fall to 2% (it has traded as low as 2.4%), and last year he outlined why he thought oil could fall to $10 a barrel.
Bloomberg notes that most forecasters started the year expecting yields to move higher as the Federal Reserve raised interest rates.
Fed Chair Janet Yellen said this week that market volatility could delay the Fed's plans for further interest-rate increases, going so far as to say the Fed had evaluated how negative interest rates would work in the US.
On Thursday, we saw a bit of the panic buying Shilling is forecasting as risk assets — notably stocks — sold off and Treasurys rallied, pushing the 10-year yield down to a one-year low below 1.6%. Other safe-haven assets including gold and the Japanese yen also saw strong buying.
Shilling is saying this "risk-off" behavior will persist until the benchmark yield falls to an unprecedented 1%.
Screenshot via Bloomberg TV
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