- 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.
Forward 1-Month T-Bill Rates Surge 0.15% In 2021 After 0.06% Rise In Current 7- And 10-Year Treasury YieldsDonald van Deventer • Fri, Aug. 1
- This week's 0.06% rise in 7- and 10-year U.S. Treasury yields triggered a 0.15% rise in implied forward T-bill rates.
- Forward 1-month T-bill rates now reach a peak of 3.62% in March 2021, one more earlier and 0.15% higher than last week.
- The 2024 implied forward U.S. Treasury 10-year yield dropped 0.01% to 3.76%.
Forward 1-Month T-Bill Rates Plunge Again: Implied Peak Drops 0.17% To 3.45% In September 2021
- Forward 1-month T-bill rates plunged for the second consecutive week, with rates down as much as 0.20% in August 2023.
- The implied peak is now 3.45% in September 2021, a full 0.17% below the implied peak from last week.
- The implied 10-year U.S. Treasury yield in 2024 dropped 0.12% this week to 3.76%.
Forward 1-Month T-Bill Rates Peak At 3.62% In 2022, Down 0.10% From Last Week's PlateauDonald van Deventer • Fri, Jul. 11
- Forward 1-month T-bill rates dropped by 0.22% in 2019 compared to last week and now show a peak of 3.62% in February 2022.
- This is down 0.10% from the plateau projected last week between 3.70% and 3.72% from 2021 to 2024.
- The implied 10-year U.S. Treasury yield in 2024 is 3.88%, down 0.14% from last week.
Forward 1 Month T-Bill Rates Reverse Last Week's Declines, Plateau Near 3.71% 2021-2024Donald van Deventer • Thu, Jul. 3
- Forward 1-month T-bill rates rose sharply, and now plateau between 3.70% and 3.72% from 2021 to June 2024.
- The biggest rise in forward 1-month bill rates was 0.19% in 2016.
- The forward 10-year U.S. Treasury yield rose 0.17% to 4.02% in 2024.
Projected Peak In Forward 1-Month Treasury Bills Drops 0.20% From Last Week With 2021 PeakDonald van Deventer • Thu, Jun. 26
- Forward 1-month T-bill rates in 2024 plunged 0.26% from last week.
- The peak in forward bill rates is down 0.20% to 3.60% and the timing moved forward from 2024 to 2021.
- The 10-year forward Treasury yield in 2024 is now 3.85%, down 0.15% from last week.
Forward T-Bill Rates Twist Up In 2016, Down In 2019, And Plateau At 3.68% From 2022 Through 2024
- Forward T-bill rates twisted up 0.14% in November 2016 and down by 0.11% in June 2019.
- Forward T-bill rates plateau at 3.68% from April 2022 through May 2024.
- The 10 year U.S. Treasury yield is projected to hit 3.94% in 2024, down 0.06% from last week.
Forward Fixed Rate Mortgage Yields Down 0.01% In 2024, Mortgage Servicing Rights Values MixedDonald van Deventer • Thu, Jun. 5
- Fixed rate mortgage rates react to U.S. Treasury movements with a lag, so fixed rate mortgage yields in 2024 were down 0.01% despite Treasury increases.
- The implied forward 15 year fixed rate mortgage yield is expected to rise from 3.302% today to 5.576% in 2024.
- Mortgage servicing rights valuations were mixed for the week.
Forward T-Bill Rates Surge 0.26% In 2019, Projected 10 Year Treasury Yield In 2024 Up 0.15%
- Implied forward T-bill rates jumped 0.26% in 2019 this week as Treasury yields at 5 through 10 years increased substantially.
- The implied forward 1 month T-bill rate now peaks at 3.72% in November 2021.
- We explain the relationship between the forward rate calculations reported in this article and more traditional interest rate forecasts.
- Our monthly "Continuum" chart anticipated a misstep for the "Great Rotation" crowd.
- Yields are now approaching support, and we are no longer bullish on T bonds.
- Beyond nominal bond considerations, the T bond market is key to in-depth macro analysis.
Forward T-Bill Rates Flatten, With Projected 10 Year Treasury Yields Down 0.14% In 2024 From Last Week
- Implied forward T-bill rates rise steadily to 3.77% in 2024, with the peak beyond that date.
- Implied bill rates were down as much as 0.18% in 2020 compared to last week.
- The implied forward 10 year U.S. Treasury yield dropped 0.14% to 3.83% in 2024.
Fri, Sep. 12, 9:48 AM
- It's taken less than two weeks in September to erase all of the summer's big gains in long-term Treasury prices. Today's five basis point jump in the 10-year yield to 2.60% brings it above the level it was at just after the Memorial Day weekend.
- If Europe led yields south during the summer, it's leading them north now, with the German 10-year Bund yield up another five basis points to 1.05% after sinking to below 0.9% two weeks ago. Italian, Spanish, and British yields are sharply higher as well (though all three countries sport 10-year rates lower than the U.S.).
- TLT -0.7%, TBT +1.4%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DLBS, DTYS, VGLT, UST, UBT, VGIT, TLO, TBX, GSY, SCHR, TENZ, DTYL, LBND, ITE, TYD, TYBS, DLBL, TBZ, DFVL, FIVZ, DFVS, TYNS
Wed, Sep. 10, 8:58 AM
- "It's almost comical" that experts continue to forecast rising rates, says Jeff Gundlach. The downgrade of GDP forecasts has now become an annual event, yet "hope springs eternal" that 3% growth is just around the corner.
- Look no further than housing, says Gundlach, for what's holding the economy back. There's a secular trend at play as demographics continue to force a shift away from home ownership, and the cyclical action of rising home prices will just accelerate this.
- Earlier, the MBA reported mortgage application volume fell 7.2% last week, bringing the MBA index to its lowest level since December 2000. Refinance volume fell 11% to its lowest level since Nov. 2008, and purchase volume fell 3% on the week, and 12% from a year ago.
- The purchase print is especially troubling, says Diana Olick, as all-cash institutional buyers are moving out of the market, leaving mortgage-dependent buyers to pick up the slack.
- The 10-year Treasury yield is higher by two basis points to 2.53%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, UBT, VGIT, SHV, PLW, GOVT, VGSH, TLO, TBX, SCHO, GSY, SCHR, TENZ, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, TUZ, DLBL, DTUL, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR
Fri, Sep. 5, 8:43 AM
- The weak headline jobs number gets a little bit worse after revisions, with August's 209K jobs gain revised higher by 3K, but July's 298K gain adjusted lower by 31K.
- The average workweek of 34.5 hours was unchanged for the sixth straight month. Average hourly earnings of $24.53 was up $0.06 in August, and up 2.1% on a Y/Y basis.
- The labor force participation rate of 62.8% fell from 62.9% in July. A year ago, it was 63.2%. Total not in labor force of 91.8M vs. 90M one year ago.
- The broader U-6 unemployment rate slipped to 12% from 12.2% in July. One year ago it was 13.6%.
- Lower ahead of the report, S&P 500 (NYSEARCA:SPY) futures have bounced back to flat, and the 10-year Treasury yield dives lower, now off six basis points to 2.39%.
- TLT +0.4%, TBT -0.8%.
- Also lower ahead of the number, gold (NYSEARCA:GLD) is now ahead by 0.3%.
- The dollar (NYSEARCA:UUP) is bouncing around, but little-changed on the session.
- Full report
Fri, Sep. 5, 4:47 AM
- U.S. data released today is expected to show steady job growth, rising in August to 225K from 209K in July, and a slight drop in the unemployment rate to 6.1% from 6.2%.
- Adding to the ECB's move for a new securities purchase program and cutting its key rates, highlighting an improved labor market will spur debate as to whether the Fed will step back from its commitment to keep rates low for a "considerable period" or hang on to its current policy due to a weak global economy.
- ETFs: TBT, TLT, UUP, TMV, UDN, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DLBS, DTYS, FORX, VGLT, UDNT, BIL, UUPT, UST, UBT, STPP, SHV, VGIT, PLW, VGSH, TLO, GOVT, FLAT, TBX, SCHO, USDU, GSY, SCHR, TENZ, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, DTUL, DLBL, TUZ, TBZ, FIVZ, DFVL, DFVS, TYNS, USFR, TFLO, TAPR
Thu, Sep. 4, 12:00 PM
- "It's the beginning of the end of the bond market rally," David Tepper tells Bloomberg. "We are done." His comments come after the ECB earlier today cut interest rates and set about launching an asset purchase program.
- After dipping to 2.39% in the aftermath of the ECB action and a minor miss in the ADP jobs report, the U.S. 10-year Treasury yield has shot back higher, up five basis points on the session to 2.45%
- The German 10-year Bund yield is up one basis point at 0.97%, while Spanish and Italian 10-year yields are sharply lower, with both - Spain at 2.18%, and Italy at 2.35% - comfortably lower than the U.S. 10-year.
- TLT -1%, TBT +2%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, PLW, TLO, GOVT, TENZ, LBND, TYBS, DLBL, TAPR
Thu, Sep. 4, 8:22 AM
- The 10-year U.S. Treasury yield slips to 2.39% from 2.42% following the slight miss in the ADP jobs number, with gains of 204K vs. expectations of 220K. In addition, July's 218K job gain was revised lower by 6K.
- Earlier, the ECB cut rates by 10 basis points across the board.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
Tue, Sep. 2, 3:03 PM
- First, says the team, the economy has improved and economic data has been beating expectations. The bank's Economic Data Surprise Index has risen substantially from its lows and now stands at its highest level since May.
- Second is valuation, with Treasury yields at their lowest point of the year.
- Third is the tendency for Treasury yields to rise during the week of the nonfarm payrolls report.
- Fourth - yields also tend to rise in the weeks leading up to FOMC meetings which also include economic projections and a press conference (next meeting is Sept. 16-17).
- Unfortunately, much of the "tactical" move may have already been missed as the 10-year yield has shot up eight basis points today to 2.42%
- Previously: Surprising jump brings ISM to highest since March 2011
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DTYS, DLBS, VGLT, UST, UBT, PLW, VGIT, TLO, GOVT, TBX, GSY, TENZ, SCHR, DTYL, TYD, ITE, LBND, TYBS, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS, TAPR
Tue, Sep. 2, 10:12 AM
- New Orders of 66.7 is a 3.3 point rise from July's level, and the highest read for that subindex since April 2004. Production of 64.5 also rises 3.3 points in August.
- Employment 58.1 vs. 58.2; Supplier Deliveries 53.9 vs. 54.1; Inventories 52 vs. 48.5; Prices 58 vs. 59.5; Backlogs 52.5 vs. 49.5.
- "Business is strong. Labor is becoming a difficult issue," says a respondent in the Furniture & Related Products industry. From a respondent in Primary Metals: "Strongest month in years. Business is solid...Awesome!"
- Previously: ISM Manufacturing Index rises to 59 in August
- Full report
- Already lower on the session, Treasury prices decline a bit further, with the 10-year yield now higher by six basis points to 2.40%. TLT -1.4%, TBT +2.6%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UST, UBT, PLW, SHV, VGIT, VGSH, TLO, GOVT, TBX, SCHO, GSY, TENZ, SCHR, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, TUZ, DLBL, DTUL, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR
Tue, Sep. 2, 7:32 AM| Comment!
Thu, Aug. 28, 10:20 AM
- A series of strong economic reports (Q2 GDP, jobless claims, home sales) is failing to halt the decline in the 10-year Treasury yield, which slips another four basis points to 2.32%. The German 10-year Bund yield is lower by two basis points to 0.89%.
- At issue today is Ukraine's assertion the Russian military has invaded the country. "It's more overt now," says a senior NATO military officer, and NATO reports "well over" 1K Russian troops are inside Ukraine, with another 20K just across the border in Russia.
- TLT +0.75%, TBT -1.5%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
Mon, Aug. 25, 3:18 PM
- The 10-year Treasury yield is lower again today - off two basis points at 2.39% - but for an explanation, it's perhaps best to look across the pond where the 10year German Bund slid all the way to 0.94% amid Mario Draghi's promise of more monetary ease and a disappointing Ifo survey.
- Janney chief fixed-income strategist Guy LeBas notes the very high correlation on the long end between Treasurys and Bunds of late. While correlations will fluctuate, these patterns can last for several months, so as long as German yields stay under pressure, there's a "decent probability" U.S. ones will as well.
- "The European interest rate markets are telling us that, one, there’s a very high probability of low inflation or deflation that will last for years to come, and two, that the ECB will be essentially impotent in generating enough inflation to break the eurozone out of this current spiral."
- TLT +0.35%, TBT -0.7%
Fri, Aug. 22, 10:12 AM
- The major equity averages remain little-changed as do Treasury prices following the release of Janet Yellen's Jackson Hole address. Her talk sticks to the game plan - the first rate hike remains on tap for next year; the headline unemployment rate overstates labor market improvement; if employment or inflation picks up, hikes could come sooner than expected.
- SPY +0.1%, TLT +0.1%, TBT -0.2%
- Gold (NYSEARCA:GLD) remains as it was prior to the speech, +0.2% to $1,278 per ounce.
- The dollar (UUP +0.2%) creeps higher.
Thu, Aug. 21, 10:14 AM
- As high as 2.45% earlier this morning, the 10-year Treasury yield is now lower by two basis points on the session to 2.41% despite a more than 4-year high in the Flash Manufacturing PMI, a 3 1/2-year high in the Philly Fed Business Outlook, and Existing Home Sales rising past expectations in July.
- TLT +0.2%, TBT -0.4%
- A check of Eurodollar futures finds the first Fed rate hike being priced in for next Spring.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UST, UBT, SHV, VGIT, TLO, VGSH, TBX, SCHO, GSY, SCHR, TENZ, DTYL, LBND, TYD, ITE, DTUS, TYBS, SST, DTUL, DLBL, TUZ, TBZ, DFVL, FIVZ, DFVS, TYNS
Wed, Aug. 20, 2:15 PM
- The 10-year Treasury yield adds another basis point following the FOMC minutes, now ahead 2.5% bps on the session to 2.43%. Looking at a rate more sensitive to Fed policy, the 5-year note yield jumps 4.5 bps to 1.625%.
- The minutes show many committee members believing the labor market is improving faster than anticipated across a whole range of indicators, and the time is getting near for when it can no longer be described as underutilized.
- TLT -0.4%, TBT +0.8%
- 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
Tue, Aug. 19, 8:42 AM
- The blowout July housing starts print has Treasury prices giving up just a hair of their premarket gains, with TLT +0.4% and the 10-year yield still lower by two basis points at 2.37%.
- Perhaps helping is July's core CPI number coming in with a rise of just 0.1% vs. 0.2% expected.
Fri, Aug. 15, 1:34 PM
- Unless he's talking about hitting 2.2% today, it's not such an outlandish prediction given the big rally in Treasury prices of late. On the session, the 10-year yield is lower by a full seven basis points to 2.33%.
- As for 2%, Gundlach - speaking on a CNBC interview - doesn't think we'll get there, but momentum is a hard thing to judge, and there's plenty pushing yields lower right now.
- TLT +1.2%, TBT -2.4%
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