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I've updated the charts below through yesterday's close. The S&P 500 is now only 1.29% off its interim high of 1,465.77 set on September 14th, the day after QE3 was announced. The interim low since then was 1,353.52, a decline of 7.66% a month later on November 15. The 10-year note closed yesterday at 1.84, which is only 4 basis points off its interim high of 1.88, also set the day after QE3 was announced. The historic closing low was 1.43 on July 25th. With what looks like a Santa Rally in stocks underway, yields have risen to levels last seen about two months ago. What will be particularly interesting is how yields (and equities) fare in the last four market days of 2012 if the various Fiscal Cliff issues are not resolved by the end of this week.

The latest Freddie Mac Weekly Primary Mortgage Market Survey puts the 30-year fixed at 3.32 percent, three basis point above its historic low set four weeks ago.


Here is a snapshot of selected yields and the 30-year fixed mortgage starting shortly before the Fed announced Operation Twist.

For a eye-opening context on the 30-year fixed, here is the complete Freddie Mac survey data from the Fed's repository. Many first-wave boomers (my household included) were buying homes in the early 1980s. At its peak in October 1981, the 30-year fixed was at 18.63 percent.

(click to enlarge)

The 30-year fixed mortgage at the current level is a confirmation of a key aspect of the Fed's QE success, and the low yields have certainly reduced the pain of Uncle Sam's interest payments on Treasuries (although the yields are up from recent historic lows of this summer). But, as for loans to small businesses, the Fed strategy is a solution to a non-problem. Here's a snippet from the latest NFIB Small Business Economic Trends report:

Six percent of the owners reported that all their credit needs were not met, down 2 points. Twenty-eight (28) percent reported all credit needs met, and 52 percent explicitly said they did not want a loan. Only 3 percent reported that financing was their top business problem, compared to 23 percent citing taxes, 23 percent citing weak sales and 18 percent citing unreasonable regulations and red tape.

A Perspective on Yields Since 2007

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 U.S. Department of the Treasury and the New York Fed's website for the FFR.

Now let's see the 10-year against the S&P 500 with some notes on Fed intervention.

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

Source: Treasury Yield Snapshot Through 12/19/2012