Treasury Yields At Record Lows — TIPS Yield close to negative 1% — Deflation is Priced in

The treasury yields are at all time low with the 10 Y bond hitting a yield of 2.00%. TIPS (inflation protected securities) yielded - 0.9%. Yes, that's right, -0.9% as negative -0.9% as you have to pay to own those securities, and won't receive all your money back at maturity. Negative yields on TIPS are showing that the inflation rate will be negative, meaning that it's not inflation but deflation that we are currently facing.

I wonder how much time it will take for hyper-inflationist to realize that we are on the same path as Japan, and not Weimar — for many obvious reason which they will not admit. To see where we are headed, you do not need a crystal ball, what you need is a history book of Japan, from 1989 to today.

Here are a few quotes from a Bloomberg report published before the major drop in the yield:

Treasuries rose for a third day, putting U.S. government debt on pace for the best monthly returns since December 2008, as investors seek a refuge in the world’s safest securities on concern global growth is slowing. 

Yields on benchmark 10-year notes were within six basis points of the record low reached Aug. 9, the day the Federal Reserve said it would keep borrowing costs unchanged until at least mid-2013. Treasuries have returned 1.8 percent since Standard & Poor’s lowered the U.S. credit rating for the first time on Aug. 5 and are up 2.9 percent this month. A Bank of America Merrill Lynch’s Global Government Bond Index that excludes the U.S. has increased 1.7 percent in August. 

[...] Ten-year note yields dropped eight basis points, or 0.08 percentage point, to 2.09 percent at 9:04 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities due in August 2021 rose 22/32, or $6.88 per $1,000 face amount, to 100 10/32. Yields on 30-year bonds fell nine basis points to 3.48 percent, while five-year note yields dropped six basis points to 0.86 percent. 

Two-year notes yield 0.18 percent.[...] “Long-term inflation is the main driver of interest rates and that doesn’t exist right now,” Camp said. The difference in yields between 10-year Treasuries and U.S. inflation-indexed securities fell to as low as 2.10 percent today, the least since December. The break-even rate reflects investor expectations for inflation during the next decade.

[...] U.S. five-year TIPS yielded negative 0.90 percent before today’s sale, compared with negative 0.18 percent at the auction of the securities on April 21. Investors bid for 2.57 times the amount of debt offered almost four months ago, versus the average of 2.61 for the past 10 auctions. Indirect bidders, the investor class that includes foreign central banks, bought 39.5 percent, versus the 10-sale average of 35.5 percent. 

Treasuries have returned 7.3 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Japan’s government bonds have gained 1.1 percent, while German bunds have returned 5.1 percent, the indexes show.