What's New: Treasury yields have risen significantly since their historic lows on July 25th. At today's close the 3-year note was up 14 basis points (bps), the 5-year 27 bps, the 7-year 37 bps and the 10-year 40 bps. The 20- and 30-year bonds were up 46 and 50 bps, respectively. Yesterday's Freddie Mac survey listed the 30-year fixed-rate mortgage at 3.62, up 13 bps from its historic low three weeks earlier.
Given how low the rates were on July 25th, just 16 sessions ago, these increases are substantial. For instance, the 3-year yield is up 50 percent, 5-year 48 percent, 7-year 41% and the benchmark 10-year yield is up 28 percent from their historic lows.
Is this simply a short-term blip, or were the July lows a a major turning point? Time will tell.
As for the Fed's, Operation Twist, here is a snapshot of selected yields and the 30-year fixed mortgage since the inception of program.
The 30-year fixed mortgage at current levels no doubt suits the Fed just fine, and the current low yields have certainly reduced the pain of Uncle Sam's interest payments on Treasuries. But, as for loans to small businesses, the Fed strategy is a solution to a non-problem. Here's a snippet from a recent NFIB Small Business Economic Trends report:
Ninety-three (93) percent of all owners reported that all their credit needs were met or that they were not interested in borrowing. Twenty-nine percent reported all credit needs met, seven percent reported that not all of their credit needs were satisfied and 51% said they did not want. Only 3% reported that financing was their top business problem.
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.