What is happening to the US treasury yield?

 10-year treasury yield: Trending down.

The treasury price and its yield are inversely related which means that when its price moves up, its yield will move down and vice versa.  The fall in the 10-year treasury yield shows that investors have been buying up the US treasuries and pushing their yields down.  Why are investors buying treasuries?

http://sg-stock.blogspot.com/2021/05/the-us-fed-is-under-tremendous-pressure.html

The US has an excessive liquidity issue now because the banks and investors are returning the excess funds to the government in the revere repo market and buying the US treasuries. Now that we've established what's happening in the US treasury market, we will analyze the US treasury situation from another perspective.

10-year breakeven inflation rate (inflation expectation) formula:

10-year inflation expectation = 10-year treasury yield - 10-year Treasury inflation-protected security (TIPS)

June 10:

10-year treasury yield = 1.45%

10-year TIPS = -0.9%

10-year inflation expectation = 1.45% - (-0.9%) = 2.35%

Therefore, the 10-year treasury yield formula will be:

10-year treasury yield = 10-year inflation expectation + 10-year TIPS

1.45% = 2.35% + (-0.9%)

From the aforementioned formula, we can deduce that the investors are projecting the expected US inflation and TIPS to fall continuously because these 2 declines will cause the 10-year treasury yield to decline too.

In other words, the investors are stating that they expect US inflation to decline in the future by driving the US treasury yield down.

We've analyzed the US treasury market from 2 different perspectives and have reached 2 conclusions.

Conclusion 1:

The US treasury yield is trending lower because of excessive liquidity.

Conclusion 2:

The US treasury yield is trending lower because the investors are expecting lower inflation by investing in the US treasury.

Which conclusion is the truth?

Just watch what Yellen and Powell are doing and the truth will reveal itself.  Cheers!