Bond markets often offer a preview of what's ahead for economies. And the plunge of yields in the United States, the eurozone and Japan has many experts concerned.
The 10-year Treasury yield dropped to its lowest close since May 2013 Tuesday — 1.96 percent. The yield stood at 1.99 percent Wednesday morning.
"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."
Fears of recession and deflation abound in Europe, especially after Wednesday's news that consumer prices slipped 0.2 percent last year.
Economists' consensus has been that the Federal Reserve would start raising interest rates around mid-year. But star bond investor
Bill Gross, a fund manager at Janus Capital Group, said in a commentary that plunging oil prices and a soaring dollar will probably keep the Fed on hold until late this year or even next year.
Both falling oil prices and a rising dollar can act as deflationary forces.
Meanwhile, another star investor, Jeff Gundlach, CEO of DoubleLine, is concerned the Fed may act over-precipitously on rates. "They might end up overthinking things, being too clever by half and end up raising rates too soon," he said in a webcast last month,
The New York Times reported.
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