By CNBC.com With AP | 31 Mar 2008 | 03:23 PM ET

Turbulent credit markets and a faltering economy have pushed US Treasury yields so low that their investment value is practically non-existent.

The two-year Treasury note, for example, is currently yielding around 1.63%. If you take inflation into account--currently between 2% and 3% annually--that means you're actually losing money......

Recent massive Treasury rallies are a testament to the safety premium carried by government-backed bonds. These rallies were sparked by concerns about the fragile economy and extreme investor aversion to risky debt....

"The main factor sending yields lower right now is the market's expectations for more rate cuts," said Larry Rothman, a senior analyst for DebtVisions. "The market has baked in its expectations for more rate cuts."
Traders have pushed the 2-year yield lower in a clear signal that the market expects the Federal Reserve to build on recent massive rate reductions and cut the overnight Fed funds rate, now at 2.25 percent. The 2-year yield sometimes trades as a proxy for the Fed funds target.

The problem for Treasury buyers is that, even in a phase of diminished investor expectations, few people are enthusiastic about loaning the government money for a full two years in exchange for a mere 1.6 percent or 1.3 percent gain.....

http://www.cnbc.com/id/23884571