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


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.

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Comments (2)
  • Flod
    , contributor
    Comments (190) | Send Message
     
    I don't see a 4% yield on 10Y treasurers in the coming years through tapering by the FED. The small companies requires money for their investments which also is a good move to increase employement.
    12 Sep 2013, 03:48 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11357) | Send Message
     
    The large cap banks are going to derive a ton of profit from this semi-permanent spread.

     

    Expect EPS to explode over the next several quarters driving up both p/e and share prices.
    13 Sep 2013, 10:27 AM Reply Like
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