An aggressive rally in the Treasury market this morning has resulted in the lowest 10-year Treasury yield since June of last year. Nearly everyone is looking for an explanation as to why longer-term interest rates continue to fall in the face of reduced Fed support and better economic data. So what is going on?
To boil things down, there are really only two roads we can follow in an environment of such as this. The economy will either muddle along at a sub-par rate of about 2 percent until balance is restored, or we go down the path of running up debt in an effort to produce higher growth rates in the near term.
The global economy looks poised to display better growth performance in 2014. Leading indicators are pointing upward -- or at least to stability -- in major growth poles. However, for this to translate into reality policymakers will need to be nimble enough to calibrate responses to idiosyncratic challenges.