Elephant in the room: Treasury bond yields reach record low.

The mounting demand for U.S. Treasury bonds has driven prices so low that some are negative. That's right: Buyers are paying Uncle Sam to loan him money.

Gisela Brandhoff / Eurohypo AG / Business Wire / File
Elephant Tembo meets Bull and Bear at the Frankfurt Stock Exchange in Frankfurt, Germany, in this file photo from May 13, 2005. The Treasury bond market has reached ridiculousness of elephantine proportions.

The demand for U.S. Treasuries because of their perceived safe haven status keeps pushing down the yields to increasingly ridiculous levels. The yield on 10-year inflation protected Treasury securities has dropped to a record low 0.67% today (as always, this number may have gone down or up by a few basis points when you read this), compared to about 1.5% in the beginning of the year and about 2% in the beginning of 2009 when nominal yields last reached the lows that we have seen today.

The situation is even more extreme for the 5-year inflation protected Treasury security, where the yield is now -0.14%, that's right a negative number. This is also a dramatic drop from about 0.5% in the beginning of 2010 and about 2.1% in the beginning of 2009.

Some investors are thus so desperate to invest in Treasuries, that they're willing to pay the U.S. federal government to borrow their money, instead of the other way around.

You can say a lot of things about bond markets today, but definitely not that they're rational.


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