Treasury Yields, Fed
Inflation numbers and Treasury yields are a relationship like no other. Are they married to each other? Are they just friends? Who knows?
Regardless, it is a fact that the yield on 10-year Treasury bonds has already returned to the level it was at the end of last week.
When the Consumer Price Index emerged Tuesday morning with “less than expected” numbers, indicating a possible slight slowdown in inflation, Treasuries found buyers on expectations that the Fed would be done with rising rates and may be on the verge of raising rates. Cut.
Stock buyers showed exuberance, the Nasdaq 100 regained its summer highs and then today it was sold off again thanks to further Treasury sales.
Treasury Yield Charts.
Long-term, 30-year Treasury yields look like this:
CBOE 30-year Treasury yield daily chart, 11 15 23.
After peaking at 5% in mid-October (chart shows basis points), bonds rallied at the end of the month and then continued until the release of the November CPI, Monday. After falling to almost 4.6%, the 30-year yield is back up today to almost 4.7%, with some investors having a moment’s thought.
Here is the chart of 10-year Treasury yields:
CBOE 10-year Treasury yield daily chart, 11 15 23.
You can see that this is the same basic model as the 30 year but with slightly lower yields. The T-Note yield didn’t quite reach 5% in October, but came close and is now down to 4.535%. It’s common for 10-year bonds to offer a slightly lower yield than 30-year bonds: investors are rewarded if they stay longer.
The 3-month Treasury yield chart is here:
CBOE 3-Month US Treasury Yield Chart, 11 15 23.
Treasury yields reached 5.35% in early October and are now down to 5.255%. Note that in mid-March the yield bottomed out at 4.3%. A long way has been covered in a short time.
It is unusual that this very short-term Treasury vehicle offers a higher yield than the 30-year bond and the 10-year note. This is why the financial media refers to the weirdness of the “yield curve”: fears of higher inflation and possible rising interest rates remain.
Here is the daily price chart of the benchmark bond fund, the iShares 20+-Year US Treasury Bond ETF:
iShares 20+ Year Treasury Bond ETF Daily Price Chart, 11 15 23.
Buyers began to show up at the end of October, then in significant numbers at the beginning of November. The bond rally was strong enough to climb above the descending 50-day moving average (the blue line) and close higher for at least 3 sessions. The price remains below a downward 200-day moving average (the red line).
Of course, it’s not just about inflation. There is a sense that U.S. political dynamics pose a problem for the bond market as the country heads into the 2024 election season.
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