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Expand chart
Data: FactSet; Chart: Axios Visuals

U.S. long-term interest rates have plunged to unprecedentedly low levels — lower even than was seen at the depths of the global financial crisis.

Why it matters: The economic world has never looked like this — not in the U.S., anyway. Rates this low don't make rational sense, and they speak to severe economic pessimism and dislocation.

  • The bottom line: This is the market's way of begging Treasury secretary Steven Mnuchin to invest in projects that will improve America's economic health over the long term.

Driving the news: For a homebuyer looking at 30-year fixed mortgage rates of 2.75%, the current state of affairs can seem unambiguously positive. But these rates violate common sense intuitions of what money is worth.

  • Consider a $1,000 tax refund that you're expecting from the government this month. Would you perhaps prefer $1,5o0, payable to you (or your heirs) in the year 2050?
  • Very few individuals would accept that offer. After all, $1,500 today buys only as much as $740 would have bought 30 years ago.
  • The market, however, prefers the distant promise to cash today. A U.S. government obligation to pay $1,500 in 2050 is worth more than $1,000 today.
  • In fact it’s worth $1,011, according to the Treasury "strips" market, which trades government promises to pay a certain amount on a certain date.

How it works: Economic fears driven by the novel coronavirus have only served to increase the amount that investors are willing to pay for the safety of U.S. government obligations.

  • Flashback: Before the financial crisis hit, government promises to pay in the distant future were worth very little — only about 25 cents on the dollar, for payments 30 years hence.
  • Since the crisis, expectations for future growth and inflation have remained sluggish. The less vibrant an economy, the harder it becomes to invest money for a large future payoff, and the more that investors retreat to safety at any price.

The big picture: The U.S. government can borrow money today while promising to repay much less, in real terms, than it will be worth in the future. The best time for any government to invest in the future is when money is free, like it is now.

Go deeper

Updated 2 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: CDC director defends agency's response to pandemic — CDC warns highly transmissible coronavirus variant could become dominant in U.S. in March.
  2. Politics: Biden readies massive shifts in policy for his first days in office.
  3. Vaccine: Fauci: 100 million doses in 100 days is "absolutely" doable.
  4. Economy: Unemployment filings explode again.
  5. Tech: Kids' screen time sees a big increase.
  6. World: WHO team arrives in China to investigate pandemic origins.
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Russian opposition leader Alexey Navalny was detained upon his return to Moscow on Sunday, which came five months after he was poisoned with the nerve agent Novichok. He returned despite being warned that he would be arrested.

The latest: Navalny was stopped at a customs checkpoint and led away alone by officers. He appeared to hug his wife goodbye, and his spokesman reports that his lawyer was not allowed to accompany him.

Mike Allen, author of AM
5 hours ago - Politics & Policy

Biden's "overwhelming force" doctrine

President-elect Biden arrives to introduce his science team in Wilmington yesterday. Photo: Kevin Lamarque/Reuters

President-elect Biden has ordered up a shock-and-awe campaign for his first days in office to signal, as dramatically as possible, the radical shift coming to America and global affairs, his advisers tell us. 

The plan, Part 1 ... Biden, as detailed in a "First Ten Days" memo from incoming chief of staff Ron Klain, plans to unleash executive orders, federal powers and speeches to shift to a stark, national plan for "100 million shots" in three months.