Fed Funds at 0% caps 10-year Treasury yield at 4%

|By:, SA News Editor

Just another 110 basis points to go. The spread between the 10-year Treasury yield and the target Fed Funds rate has never exceeded 400 basis points, according to SocGen. Never.

If the FOMC keeps Fed Funds at about 0% until at least the end of 2015 (as it's promised), this would seemingly cap the 10-year yield (currently 2.9%) at 4% for the next 2-plus years. Alas, the Dec 2015 Eurodollar contract at 98.31 is pricing in about 125-150 basis points in Fed rate hikes by then. Somewhere, there's an opportunity in all of this.

Long-maturity Treasury ETFs: TLH, TLT, IEF, DTYL, DLBL, ILTB, TENZ, ITE, TLO, EDV, VGIT, VGLT, TMF, TYD, LBND, UBT, UST, TMV, TYO, DSTJ, DSXJ, SBND, PST, TBT, DTYS, DLBS, TBF, TTT, TYNS, TYBS, TBX

Yield curve ETFs: STPP, FLAT.