A messy break-up of the euro-zone could see the yield on 10-year US Treasuries hit a new low. But the US does not appear set for a long period of deflation. Any crisis-driven decline in the yield towards the sub 1% level that prevails on 10-year Japanese government bonds (JGBs) would therefore probably not last long. Our end-2012, 2013 & 2014 forecasts for the 10-year US Treasury yield remain 1.5%.
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