Answer to Question #53819 in Macroeconomics for raymondtin

Question

treasuries yields fell sharply on weak economic data, what is the mechanism behind? Does the lower yields mean a higher treasuries price which in turn means a higher demand? Why a higher demand of US dominated treasuries while the economy is weak?
raymondtin

Answer 1

Treasury yields declined Tuesday after a flurry of weak economic reports suggested the data-dependent Federal Reserve might have to delay plans to deliver its first rate hike in nearly a decade. Tuesday’s price action in part refocused the Treasury market’s attention on U.S. fundamentals, but the unfolding situations in Greece and China, where the stock market crashed last week, will continue to weigh on the market.
The lower yields mean a higher­ treasuries price which in turn means a higher demand. The demand of US­ dominated treasuries is higher while the economy is weak, because in good times the price of treasuries will be higher.