Mr. Bernanke is intentionally suppressing the nominal risk free rate of return and he is forcing investors to search for yield. By keeping interest rates artificially low and well below the rate of inflation, the Federal Reserve has engineered this impressive rally in American stocks.
Figure 2 captures the real US Treasury Yield Curve [after deducting inflation] across various maturities. As you can see, the real yields of the entire US Treasury Yield Curve (except the 30-Year US Treasury Bond) are currently negative.
True but how do you explain the 10 yr US-treasury yield starting to pick up lately and in a big way? What will Bernake’s response be?
The yield curve is rising as money flows out of bonds (because of the low yields) and into stocks. Window-dressing ahead of the election.