The Puzzle of Low U.S. Treasury Yields

Yields on long-term bonds in advanced economies are at historically low levels. Several factors appear to be at work. While financial stability risks currently appear moderate, a persistence of low long-term Treasury yields could lead to a buildup of such risks if it encourages excessive borrowing or investor risk-taking.

Developments during the last month

• The U.S. dollar rally paused and U.S. interest rates declined modestly amid weaker U.S. economic data
• U.S. equity indexes made further gains, setting new price records
• Oil prices traded at the high end of their year-to-date range, still roughly 40 percent below 2014 highs
• Uncertainty over Greek government financing began to impact other euro area markets
• Chinese authorities made several important policy moves, including their largest rate cut since 2008 and measures to temper the rapid rise of equity prices

Feature: A Closer Look At Trends in Cross-Asset Volatility