Falling interest rates are often seen as a good thing, as they can spark economic activity and boost stock prices.
But some experts are worried about the global decline in rates that sent the 10-year Treasury yield to its lowest close since May 2013 Tuesday — 1.96 percent.
"Make no mistake, these low levels of rates are challenging the notion that we are going to see robust and constant growth," George Goncalves, head of U.S. rates strategy at Nomura, told
The New York Times.
The worry is that the drop in rates — European bond yields are even lower than are those in the United States — are a sign of deflation. The risk is greater in Europe and Japan, as their economies are in worse shape than the U.S. economy is.
"We're in the seventh inning of a business cycle and it may be coming to an end soon," Mr. Goncalves, the analyst, said. "It is not calamity but a slowness that could linger for some time."
The drop of oil prices to 5 ½-year lows has contributed greatly to the deflationary fears. In Europe, consumer prices fell 0.2 percent last year.
In the United States, consumer prices rose only 1.4 percent in the 12 months through November, and the dollar's rise to multi-year highs against a range of currencies may keep a lid on price increases.
"The bond market is showing growing doubt whether the U.S. has the ability to withstand the jolts from abroad," William O'Donnell, head of U.S. government-bond strategy at RBS Securities, told
The Wall Street Journal.
"The Fed may be forced to delay an interest rate increase this year if Europe is hit by a crisis."