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How Low Bond Yields Hurt Consumers, Savers Paying for 'Debt Bubble'

Stocks in this article: TLT


NEW YORK (TheStreet) -- Treasury bond yields plummeting to levels not seen since 2012 are prompting some analysts to declare bonds are in a bubble. I disagree!

Throughout the financial crisis and during its recovery, global debt increased dramatically in what I call a "debt bubble."

Read More: Warren Buffett's Top 10 Dividend Stocks

On July 5, 2012, as the yield on the 30-year bond was approaching its record low at 2.45% I wrote, "U.S. Treasury Yields Are Not in a Bubble" Then on July 18 I wrote, "Low Yields Don't Make a Bond Bubble" and the record low yield followed on July 26.

Take a look at the graph shown in the July 18, 2012, post as its shows a bond bubble occurred in the early-1980's when we had double-digit yields. Yields can rise indefinitely but can never go below zero percent.

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A major reason for the 2014 bond market rally is that U.S. yields are above other countries' yields. For example, the Treasury 10-year yield closed Thursday at 2.34% with the German 10-year yield at 0.87%.

My focus today is the yield on the U.S. 30-year bond which traded as low as 3.06% on Thursday.

Let's look at the daily graph of the yield on the 30-year Treasury bond.

Courtesy of MetaStock Xenith

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