10-year JGB first broke under 3% 16 years ago, on June 23, 1995, according to Japan’s Ministry of Finance. It first happened here in November 2008, so we’re 2 1/2 years from that event.
Below is a chart covering the ensuing period for each subsequent to the first break under 3%. I’m unclear as to what, specifically, would prevent us from replicating the Japanese experience. To be clear, I’m not suggesting we will, only wondering what, if anything, would make our following in their footsteps impossible.
FYI, this post was scheduled — on my word of honor — before Paul Krugman put this post up. Sounds to me like Gross just continues to talk his book: “Compare it [our market] to the Japanese market which we know is a moribund, dead, lost-decade kind of economy,” Gross said, “and the Japanese bond yields .8%. Here we have the US with a dynamic economy, … with respect to their Treasury departments, the U.S. and Japan are just 80 or 90 basis points apart.”
Seems to me that Mr. Gross is a little out of touch with the American public (emphasis mine): “By 2 to 1, Americans say the country is pretty seriously on the wrong track, and nine in 10 continue to rate the economy in negative terms. Nearly six in 10 say the economy has not started to recover, regardless of what official statistics may say, and most of those who say it has improved rate the recovery as weak.” I believe the majority of Americans view ours right now as a “moribund, dead, lost-decade kind of economy.” And the numbers of late support that assessment.