The 10-year Treasury yield yesterday took a breather from plumbing new record lows, but it’s not obvious that the 35-year slide in interest rates is over. The benchmark rate ticked up to 1.40% yesterday (July 8) via Treasury.gov’s daily data, a whisker above Monday’s all-time low of 1.37%. All the usual caveats apply for deciding if even lower yields are coming. But if the rest of the world offers a clue (such as the expanding tide of negative rates), it’s premature to bet against a multi-generational trend that’s confounded almost everyone who studies the bond market.
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Private payrolls in the US increased by 172,000 in June, according to this morning’s release of the ADP Employment Report. The gain, although modest by the standards of the last several years, marks the strongest advance since March. But the annual pace of growth dipped to a three-year low, providing more evidence that the labor market’s expansion continues to decelerate.
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After dipping to a record low of 1.37% on Tuesday, the benchmark 10-year Treasury yield ticked higher yesterday (June 6), settling at 1.38%, based on daily data from Treasury.gov. Has the downside bias run its course? The answer awaits in the incoming economic data. Meantime, recent US numbers are sending mixed signals and new questions raised in the post-Brexit world order aren’t helping.
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The expected risk premium for the Global Market Index (GMI) eased in June, dipping for the first time since last December. GMI—an unmanaged market-value weighted mix of the major asset classes—is projected to earn an annualized 3.3% risk premium in the long term, which is slightly below last month’s estimate. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below.)
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June delivered a solid month of gains for most of the major asset classes. Although the Brexit vote late last month took markets on a roller coaster ride, when the dust cleared on June 30 the trend was heavily skewed to the positive column.
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The Capital Spectator will be taking a long weekend to celebrate the 240-year-old USexit holiday, aka Independence Day for these United States. The usual routine resumes on Tuesday, July 5—directly after the July 4 fireworks have subsided and the ringing in your editor’s ears has receded to a low, dull hum.

Happy Birthday, America!

Next month’s “advance” GDP report for the US in the second quarter is widely projected to show that economic activity will rebound from Q1’s sluggish 0.8% gain (which is expected to be revised up to 1.0% in today’s revision, according to Econoday.com’s consensus forecast). But a higher level of macro uncertainty is clouding the outlook after last week’s UK vote to leave the European Union. The US may be relatively insulated from the economic effects, but not entirely, according to a new Goldman Sachs forecast. The bank trimmed its outlook for US GDP growth in this year’s second half to 2% from 2.25% previously, Reuters reports.
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Equity markets around the world took a hit at the end of last week in the wake of Friday’s news that Britain voted to leave the European Union. Stocks almost everywhere posted sharp losses once the dust cleared for the trading week through June 24. US junk bonds, however, managed to post a small gain, delivering the best performance last week for the major assets classes, based on a set of proxy ETFs. US investment-grade bonds ticked higher as well. Otherwise, red ink dominated the field.
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