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Treasury Snapshot: With Equities at Record Highs, Where are Treasuries?

  • Written by Syndicated Publisher No Comments Comments
    May 15, 2015

    With the S&P 500 hitting a new high, let’s take a look at Treasury Yields.The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the St. Louis Fed’s FRED repository for the Fed Funds Rate.

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    Here is a closer look at the 10- and 30-year yields along with the FFR.

    A Long-Term Look at the 10-Year Note Yield

    A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 Oil Embargo that triggered the era of “stagflation” (economic stagnation with inflation). The trendline (the red one) connects the interim highs following those stagflationary years. The red line starts with the 1987 closing high on the Friday before the notorious Black Monday market crash. The S&P 500 fell 5.16% that Friday and 20.47% on Black Monday.

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    The dashed lines on the chart above were provided by Bob Bronson of Bronson Capital Markets Research. Bob comments:

    “The blue dashed lines are much more closely parallel to the all-data, log-linear best fit line – very similar to the high-low mid-channel line – since 1980. Then there is the even more currently relevant downtrend (black dashed line) since the 2007 high.”

    The 30-Year Fixed Rate Mortgage

    The latest Freddie Mac Weekly Primary Mortgage Market Survey puts the 30-year fixed at 3.85%, well below its 4.58% interim high in the summer of 2013 but above its 2015 low of 3.59% in early April. Here is a long look back, courtesy of a FRED graph, of the Freddie Mac weekly survey on the 30-year fixed mortgage, which began in May of 1976.

    Now let’s see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior.

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    For a long-term view of weekly Treasury yields, also focusing on the 10-year, see our Treasury Yields in Perspective, which we usually update on weekends.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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