The low level of 10-year rates, whether in Germany or in America or Japan, indicates three things together: first, that the probability of a recession is growing; second, that there is an ongoing flight from risk resulting in the embrace of safe-haven assets including, despite the S&P downgrade, T-bonds; third, that the market expects another wave of QE, ie quantitative expansion of the currency, with the Fed buying US government bonds by printing money with an electronic press.
The markets opened this morning hoping for the third possibility. But the underlying uncertainties remain: investors look at the dark clouds that are forming - said an analyst - and do not know if it's rain, downpour or hurricane. In uncertainty they stand still while the market is increasingly 'cheap'. Support can come from the immense liquidity in the pockets of American companies: over a trillion dollars. If prices continue to fall, the temptation for these companies to buy treasury shares becomes strong, and there are already signs in this sense.
