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Treasuries Have Added Diversity And Profits To My Portfolio
- In an August article I discussed why I was adding Treasuries to my portfolio.
- In this follow up article I review that decision.
- So far this has worked out better than planned.
Where TLT Will Go When The FED Raises Rates: It's Not What You Think
- In the last four FED tightening cycles, the interest rate on 30-year Treasurys hasn’t risen much, if at all.
- Long-dated Treasury yields usually converge as the Fed tightens and the 30-year yield is still more than 1% above the 5-year yield.
- Don’t be afraid to hold Treasurys in the face of rising short-term rates. They provide excellent diversification to an equity portfolio.
Treasury Curve Twists Sharply This Week, With Forward T-Bill Rates Peaking At 3.25% In 2021
- Current U.S. Treasury yields rose 0.06% to 0.08% this week at maturities from 2 to 7 years.
- The resulting forward 1-month T-bill rates twisted sharply, up 0.16% in 2016 and down 0.18% in 2024.
- Forward 1-month T-bill rates now peak at 3.25% in April 2021, 0.14% higher than the peak of two weeks ago.
What The Plunge In U.S. Treasury Yields Means For The Next 10 Years
- The current yield curve can be used to imply forward U.S. T-bill rates. We do this after the drop of 0.11% to 0.20% in Treasuries from 2 to 30 years.
- Forward 1-Month T-bill rates are now projected to peak at 3.11% in February 2022, 0.17% lower and 8 months later than last week's implied forwards.
- The implied U.S. Treasury yield in 2024 is 3.32%, down 0.13% from last week.
Inflation, Deflation, And Our Very Confident Bet In T-Bonds
- I’ve been touting the ongoing bull market in T-Bonds as one of the best investment opportunities of our lifetime -– a no-brainer, as far as I can recommend.
- Deflation-wise, this is where the rubber will meet the road, drawing irresistible power from the inevitable implosion of the quadrillion dollar Ponzi scheme popularly known as “derivatives.”.
- A hyperinflation would not be driven by wage pressures or rising prices, or even by a further increase in the money supply, but by the epiphany of the dollar’s worthlessness.
- Enough news has occurred in less than a week to document it in another article on Treasuries.
- To me, this news provides accelerating positive arguments for lower Treasury rates, though this is not a day-to-day timing call.
- All this is consistent with the Taper following the pattern set at the end of QE 1 and QE 2.
Forward 1-Month T-Bill Rates Plunge Again, With Peak Down 0.11% At 3.28% In June, 2021
- Current U.S. Treasury yields fell again this week, dropping 0.07% to 0.12% at maturities from 2 to 30 years.
- The peak in implied forward 1-month T-bill rates dropped 0.11% to 3.28% in June, 2021.
- The 10-year U.S. Treasury yield dropped 0.10% this week and is now projected at 3.45% in 2024, down 0.08% from last week.
- Treasury bonds may be well-positioned to rally further as QE ends, surprising consensus.
- This would reprise their action after QE 1 and QE 2 ended.
- Recent data affecting bonds is favorable as I see it.
- This article updates my case for interest rate bullishness from late August.
Forward 1-Month T-Bill Rates Fall Again, With Peak Down 0.10% At 3.39% In April 2021Donald van Deventer • Fri, Oct. 3
- Current U.S. Treasury yields fell 0.05% to 0.08% this week at maturities from 5 to 30 years.
- Forward 1-month T-bill rates dropped as much as 0.17%, with the peak now projected at 3.39% in April 2021, down 0.10% and 2 months later than last week.
- The 10-year Treasury yield is down 0.08% from last week. The forward 10-year yield in 2024 dropped 0.09% to 3.53%.
Forward 1-Month T-Bill Rates Plunge, With Peak Down 0.15% At 3.49% In 2021Donald van Deventer • Thu, Sep. 25
- Current Treasury yields dropped 0.07% to 0.14% at maturities from 3 years to 30 years this week.
- Forward 1 month T-bill rates are now projected to peak at 3.49% in February 2021, 0.15% lower than last week.
- The forward U.S. Treasury 10 Year Yield dropped 0.19% to 3.62% in 2024.
Forward 1 Month T-Bill Curve Surges Again, With Peak At 3.64% In February, 2021
- Current U.S. Treasury yields jumped 0.06% to 0.10% again this week in the 5 to 30 year maturities.
- This triggered a 0.20% or greater surge in forward 1 month Treasury bill rates in the 2020 to 2021 maturities.
- The peak in 1 month forward T-bill rates is now 3.64% in February 2021, 2 months earlier and 0.23% higher than last week.
- Fundamentals and tactical indicators have finally turned against US Treasuries in a decisive manner.
- In this short article I will explain why I believe this to be the case.
- Investors wanting to participate in this expected increase in Treasury yields can do so by increasing their exposure towards inverse Treasury ETF’s.
- Despite the gradual reduction of treasury bond purchases by the U.S central bank and forecasts of higher rates in 2015, long-term bonds have outperformed in 2014.
- The iShares 20+ Year Treasury Bond ETF has been up 13.2% YTD as of 9 Sep 2014, outperforming even the S&P500 index.
- Low inflationary pressures are countering the forecasts of higher interest rates on long-term bonds for the time being.
- Global interest rates have continued to decline throughout the summer as global growth remains sluggish and inflation pressures remain muted.
- As real yields continue to fall in the Eurozone in anticipation of ECB QE, the US Treasury bond market will become even more attractive.
- The new regulatory framework implementation will continue to nominally pull interest rates lower.
- The end of the Fed's QE program will not lead to a massive interest rate sell off in long dated US bonds due to mortgage hedging dynamics.
- Investors and traders turned their focus on the Fed yet again, with the media reciting Yellen’s Jackson Hole comments.
- What happens in the U.S. may end up being a side show relative to Europe now.
- If Draghi initiates QE and inflation expectations rise, then European yields likely rise and that could finally break the Treasury uptrend.
Forward 1-Month T-Bill Rates Twist Again With A 2021 Peak Implied At 3.32%, Down 0.06% From Last Week
- U.S. Treasury yields jumped 0.04% to 0.08% in the 2- to 7-year maturities this week.
- This caused a twist in the implied 1-month forward T-bill rates, with the May 2016 rate down 0.19% and the January 2023 rate up 0.07%.
- The peak in implied 1-month forward T-bill rates is now 3.32% in June 2021, a peak from 3 months earlier and 0.06% lower than last week.
- Buying Treasuries is like buying insurance, if everything goes well you'll be sorry you bought them.
- But when things go wrong you'll be sorry you didn't.
- The threat of rising interest rates makes it a difficult time to feel comfortable investing in treasuries.
- Here's how I am dealing with this dilemma.
Forward 1-Month T-Bill Rates Plunge 0.26%, But Forward 10-Year U.S. Treasury Yields Down Only 0.04% From Last WeekDonald van Deventer • Sat, Aug. 9
- Current 5- and 7-year U.S. Treasury yields dropped about 0.16% from last week.
- In response, forward 1-month T-bill rates dropped 0.26% in June 2016. The peak now comes at 3.45% in June 2021, about the same peak as 2 weeks ago.
- The drop in forward 10-year U.S. Treasury yields in 2024 was only 0.04%, although current 10-year yields dropped 0.15% on the week.
There are no Transcripts on TLT.
Wed, Dec. 17, 2:18 PM
- The Fed walks a fine line in its latest releases, making a rate hike in 2015 a near-certainty, but noting too-low inflation as making the pace of tightening slower than previously thought.
- Stocks like the news, with the Dow (DIA +1.6%), S&P 500 (SPY +1.9%), and Nasdaq 100 (QQQ +1.6%) all popping to session highs.
- The 10-year Treasury yield jumps nine basis points to 2.14%, and the dollar (UUP +0.4%) has given up some of its gains.
- TLT -1%, TBT +2%
- Ahead more than 3% ahead of the decision, WTI crude oil (NYSEARCA:USO) is now up 1.5% at $57.26. Gold (NYSEARCA:GLD) is up marginally following the news, now sitting at $1,200 per ounce.
- Janet Yellen's press conference begins at 2:30 ET
- Previously: "Patient" replaces "considerable time" in FOMC statement (Dec. 17, 2014)
- Previously: Employment outlook improves, inflation outlook weakens in Fed projections (Dec. 17, 2014)
Tue, Dec. 16, 7:34 AM
- The ruble is disappearing, oil continues its plunge, China's preliminary PMI read came in soft, and U.S. index futures are lower by about 0.5%.
- The news has combined to put a big bid under Treasurys, with the yield on the 10-year falling eight basis points to just 2.04% (it hit 2.01% earlier this morning).
- TLT +1%, TBT -2% premarket
- The German 10-year Bund yield is off five basis points to 0.58% - now just 22 basis points higher than Japan's ridiculous 0.36% yield.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, VGIT, TBX, BUNL, GSY, TENZ, SCHR, DTYL, TYD, LBND, ITE, GGOV, DLBL, TYBS, BUNT, DFVL, TBZ, FIVZ, DFVS, TYNS, SYTL
- Previously: Massive rate hike fails to halt ruble's slide (Dec. 16, 2014)
Fri, Dec. 12, 4:19 PM
Fri, Dec. 12, 11:24 AM
- The 10-year Treasury yield has tumbled all the way to 2.08% - a 16-month low if one forgets October's flash crash in yields. The 30-year is down to 2.77%.
- Checking Europe, German 10-year yields look about ready to challenge Japan, down another five basis points to 0.63% (Japan's at 0.40%). In the U.K., 10-year government paper yields 1.81%, Spain 1.88%, Italy 2.04% - all less than the U.S.
- 30-Day Fed Funds Futures contracts continue to price in a rate hike next year, but it's been pushed back to the September/October time frame.
- TLT +0.8%, TBT -1.6%
- The moves come, of course, as oil continues to carve out new multi-year lows (now down 3% on the session to $58.15 per barrel), setting off broad declines in the equity averages here and across the pond.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, TMF, PST, EU, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, TLO, VGSH, VGIT, SHV, TBX, SCHO, BUNL, GSY, ITLY, SCHR, TENZ, DTYL, TYD, LBND, ITLT, ITE, DTUS, GGOV, TYBS, SST, DLBL, BUNT, DTUL, DFVL, TUZ, TBZ, FIVZ, DFVS, TYNS, SYTL
Tue, Dec. 9, 9:47 AM
- Friday's blowout jobs number seems like a long time ago as the 10-year Treasury yield slides another five basis points, leaving it at 2.21% - lower now than it stood ahead of the payroll report.
- Investors are instead focused on shaky asset markets - first crude oil (lower on the session after a meek attempt at a bounce overnight), and now stock markets, particularly plunges in Greece and Shanghai today.
- "If one is serious about investing," says Joe Brusuelas, "you want to look at this chart ... because the Fed is." The graph shows the continuing steep decline in inflation expectations, now matching the low levels last seen in 2010 and 2011.
- TLT +0.9%, TBT -1.8%
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, TLO, VGSH, VGIT, SHV, TBX, SCHO, GSY, TENZ, SCHR, DTYL, TYD, LBND, ITE, DTUS, SST, TYBS, DLBL, DTUL, TUZ, DFVL, FIVZ, TBZ, DFVS, TYNS, SYTL
Fri, Dec. 5, 8:46 AM
- The 10-year Treasury yield is up nine basis points to 2.33% as the U.S. economy added 321K jobs in November, well ahead of estimates, 44K jobs were added to September and October numbers, and wage gains were strong.
- TLT -1%, TBT +2%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, VGIT, TBX, GSY, SCHR, TENZ, DTYL, TYD, LBND, ITE, DLBL, TYBS, DFVL, TBZ, FIVZ, DFVS, TYNS, SYTL
- S&P 500 (NYSEARCA:SPY) futures remain as they were before the number - up about 0.2%.
- Gold (NYSEARCA:GLD) slides 1.5% to $1,190 per ounce, and the dollar (NYSEARCA:UUP) gets perky, now up 0.7% on the session, and particularly strong vs. the euro (NYSEARCA:FXE) and the yen (NYSEARCA:FXY).
Thu, Dec. 4, 9:12 AM
- Marginally higher minutes ago, S&P 500 (NYSEARCA:SPY) futures are now lower by 0.3% alongside a 1%+ drop in Europe as Mario Draghi disappoints stimulus fans at his post-policy meeting press conference.
- Up around 2.30% earlier, the 10-year Treasury yield is now down three basis points at 2.26%. TLT +0.2% premarket.
Mon, Dec. 1, 10:54 AM| Comment!
Fri, Nov. 28, 1:26 PM
Tue, Nov. 25, 8:50 AM
- Long-term Treasury yields are busily ignoring this morning's strong GDP data in which Q3 growth was revised higher to 3.9% from 3.5% previously. The 10-year Treasury yield is at 2.30%, down one basis point on the session.
- There's not a lot of action on the short-end either, with Eurodollar futures little-changed and continuing to price in the first rate hike sometime around next September/October.
- TLT +0.15%
- Previously: Q3 GDP revised up to 3.9% growth
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, VGIT, TBX, TENZ, GSY, DTYL, SCHR, TYD, LBND, ITE, DLBL, TYBS, DFVL, TBZ, FIVZ, DFVS, TYNS, SYTL
Mon, Nov. 24, 12:44 PM
- It's not about economic fundamentals, says Jeff Gundlach, but the Fed will be forced to hike rates next year because it's what's expected. "The Fed should not be raising interest rates, and yet they don't want to be at zero, they're in a conundrum ... They might raise rates just to see what happens."
- As for the long end, Gundlach's big bat is on a flattening of the curve sometime in the next year of two "at a level previously thought unthinkable."
- Gundlach's Total Return Fund (DBLTX, DLTNX) is on a roll, with nine straight months of inflows, including about $4B in the few weeks following Bill Gross' departure from Pimco.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, STPP, TLO, VGSH, PLW, VGIT, SHV, GOVT, FLAT, TBX, SCHO, GSY, TENZ, DTYL, SCHR, TYD, LBND, ITE, DTUS, TYBS, DLBL, SST, DTUL, TUZ, DFVL, FIVZ, TBZ, DFVS, TYNS, TAPR, SYTL
Wed, Nov. 19, 2:25 PM
- Stocks enjoyed a brief bump after the release of the Fed meeting minutes, but the leading indexes have returned to slight losses: Dow -0.1%, S&P -0.3%, Nasdaq -0.5%.
- Treasury prices ticked up, pushing the yield of the benchmark 10-year note lower to 2.335%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, DLBS, TYO, VGLT, BIL, UST, STPP, UBT, PLW, SHV, VGIT, TLO, GOVT, FLAT, VGSH, TBX, SCHO, GSY, TENZ, SCHR, DTYL, LBND, ITE, TYD, DTUS, TYBS, SST, TUZ, DTUL, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS, TAPR
Wed, Nov. 19, 9:58 AM
- Alan Greenspan called it a "conundrum," but some just saw it as another failure of the Fed's central planning.
- “We wanted to control the federal funds rate, but ran into trouble because long-term rates did not, as they always had previously, respond to the rise in short-term rates,” recently said the Maestro, harking back to the middle of the last decade when yields at the long end of the curve fell despite the stomping of Greenspan's feet.
- Today's crop of bond investors is again betting on the market instead of the Fed, taking long-term rates down even as central bankers prep hikes on the short end. A rising short end combined with a stable or falling long end could quickly lead to an inverted yield curve, "turn(ing) credit creation on its head," says economics professor Tim Duy. "I'm sort of wondering what's the game plan here."
- One tool today's crop of central bankers has that Greenspan didn't: A $4.49T portfolio accumulated thanks to three rounds of QE. A sale of some of those assets could be a way to lift long-term rates, suggests Barclays' Michael Gapen. Ugh.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, DTYL, SCHR, TYD, LBND, ITE, DLBL, TYBS, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR, SYTL
Fri, Nov. 7, 11:47 AM
- Not much is going on with the major U.S. averages as they digest the fast pace of earnings and today's inline-to-strong jobs number, but Europe's heading for a nasty close, with the Stoxx 50 (NYSEARCA:FEZ) lower by 1.2%, including Germany (NYSEARCA:EWG) and France (NYSEARCA:EWQ) each down 1%.
- Possible excuses are the lack of movement on further ECB stimulus and Ukraine's claims of 32 Russian tanks rolling into its country.
- Also on the move is gold (GLD +1.9%) after an ugly run lower over the past couple of weeks.
- Meanwhile, 10-year Treasury yields - with the prospect of rate hikes next year made even more definite by today's jobs number - are sharply lower, down nine basis points to 2.31%. TLT +0.9%, TBT -1.8%
- Previously: Jobs +214K, UE rate to 5.8%
Fri, Nov. 7, 8:51 AM
- The roughly inline nonfarm payrolls report has the algos at work, but most markets are about where they were before the 8:30 ET print.
- Gold (NYSEARCA:GLD) is ahead by 0.4% to $1,146 per ounce, S&P 500 (NYSEARCA:SPY) futures are higher by 0.2%, the dollar (NYSEARCA:UUP) is lower by 0.25%, and the 10-year Treasury (NYSEARCA:TLT) yield is flat at 2.39%.
- Previously: Jobs +214K, UE rate to 5.8%
Mon, Nov. 3, 1:48 PM| Comment!
TLT vs. ETF Alternatives
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