U.S Treasury market is facing a slump after a hike in the late March this years, thus making investors worrisome to invest

A highly volatile atmosphere for government bonds is showcasing an equally higher uncertainty for the U.S. economy, which is pointing to both sluggish growth and stubborn inflation. After some of the record months earlier this year the market got scared, Treasury yields have registered sharp decline as investors had to switch their attention from worries about the rising prices to the potential fact that the rapid growth could slow down in the near future. In the 1970s, this mix of higher prices accompanied by lower growth was known as “stagflation,” which is a pejorative gaining a little traction as inflation has remained docile over the past few decades.

According to one chief financial economist, the market is currently trading on the stagflation scene. These price increases are expected to initiate demand destruction, causing a policy mistake and ultimately degrading growth prospects. The trade that is responsible for 10-year Treasury yields plummeting from a peak of 1.75% back in late March to 1.18% this week. Yields are known for trading opposite to that of price. As a result, a slump means that investors are going to purchase bonds and keep pushing prices higher.

The 10-year treasury is known as the fixed income and generally recognized as a barometer where the economy is presently headed along with interest rates. Even with Wednesday’s performance in yields, at 1.29% Treasury is not showcasing much confidence in the near future trajectory. According to a senior portfolio manager, growth and inflation doesn’t matter this year, what matters is the forecast of the 10-year Treasury over the course of 10 years and the investor is looking forward to back down from the market.