Yield On 10 Year TBill Keeps On Dropping

Even though the past few sessions in the stock market have been rather choppy, the yield on the 10 year treasury has steadily dropped over the past several weeks.

[Graph of 10 Year Treasury Yield over past 3 months]

Ever since the subprime mortgage issue led to a global liquidity crunch and subsequent stock market correction, the yield has been steadily dropping. This means that large institutions have been selling equities and moving money into safe US treasuries. It doesn’t matter if they get only 4.5% (as of today’s closing price), but at least they know they’ll get the principle back.

There seems to be a repricing of risk in the market. Any stock that is deemed to be risky has dropped in the past 6 weeks.

On the other hand, safe stocks like Warren Buffett’s Bershire Hathaway (BRK) has been rewarded and its stock price is up nearly 10%.

Lets see how long this flight to safety continues. If you have the courage to be greedy when other are fearful, you can make a lot of money.

Happy Investing!

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