It’s an inevitable question: Could U.S. 10-year yields turn negative now that German 10-year yields have fallen below zero for the first time ever and Japanese 10-year yields have dipped to record lows of negative 0.17 percent?
According to Dennis Davitt, partner at Harvest Volatility Management and a noted options market veteran, it may well happen.
“I think you could see negative rates in the U.S. If Germany and other countries in the world go even further negative, it turns into a number line game. So where zero lies on the number line, who knows?” Davitt said Tuesday on CNBC’s “Trading Nation.”
He sees rates being driven lower by two factors in addition to overall slow global growth: Stimulative central bank policies and regulations.
“The European banks under their Basel regulations, much like our Dodd-Frank, are forced to hold a certain amount of assets on their balance sheet [and] those assets have to be government-issued debt. So they’re forced to own those assets.”