Where Do Treasury Yields Go From Here? (TLT)

From Jill Mislinski: Let’s take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended the day at 2.33% and the 30-year bond closed at 2.71%.

Here is a table showing the yields highs and lows and the FFR since 2007 as of today’s close.

The 2-10 yield spread is now at 0.55%.

The chart below shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since the pre-recession days of equity market peaks in 2007.

Treasury Yields since 2007

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 blue trendlines connect the interim highs and lows following those stagflationary years. The red trendline starts in 2006, prior to the 2007 interim high and subsequent 2008 low. Note 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.

10-year Yield Log Scale

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.”

We saw a failed breakout of the downtrend in December of 2013 and a possible new breakout is currently underway. The current breakout has not managed to remain above the near decade upper trend line. It’s also possible that this is a new secular trend change. The chart here is a closeup view of the trend since the pre-recession peak in June 2007.

The 30-Year Fixed Rate Mortgage

The latest Freddie Mac Weekly Primary Mortgage Market Survey puts the 30-year fixed at 3.908%. Here is a long look back, courtesy of a FRED graph, of the 30-year fixed rate mortgage average, which began in April of 1971.

Freddie Mac 30-Year

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.

Fed Intervention

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

The iShares Barclays 20+ Year Treasury Bond ETF (TLT) was unchanged in premarket trading Thursday. Year-to-date, TLT has gained 8.76%, versus a 18.85% rise in the benchmark S&P 500 index during the same period.

TLT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 28 ETFs in the Government Bonds ETFs category.


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