- 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.
There are no Transcripts on TLT.
Wed, Jul. 9, 2:14 PM
- Stocks remain modestly higher on the session, but Treasurys add to losses following the FOMC minutes at which the committee sets an October end for QE and begins to more seriously mull an exit from its extraordinary monetary stimulus. The 10-year yield is up four basis points to 2.60%.
- Turning to the economy, growth has bounced back from its significant drop earlier in the year, according to Fed staff, which sees real GDP expanding at a faster pace than potential output over H2 and the next two years.
- TLT -0.2%
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, DTYS, TYO, DLBS, VGLT, BIL, UST, UBT, VGIT, SHV, TLO, TBX, VGSH, SCHO, GSY, TENZ, SCHR, DTYL, ITE, LBND, TYD, SST, TYBS, DTUS, DTUL, TUZ, TBZ, DLBL, DFVL, FIVZ, DFVS, TYNS
Tue, Jul. 8, 9:48 AM
- Strong employment report and coming Fed rate hikes? Long-term Treasurys have their eye on something else, with the yield on the 10-year note off another four basis points in early action to 2.57%. The yield touched 2.70% in wake of Thursday's fast nonfarm payroll number.
- Previously: Treasury yields jump, gold slumps after strong jobs print
- Checking Eurodollar futures for expectations of tighter monetary policy, they've backed off a bit from rate hikes as well, the June 2016 contract ahead by four basis points, but still pricing in a Fed Funds rate about 130 basis points higher in two years then it is now.
- TLT +0.75%
- ETFs: TBT, TLT, TMV, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, TYO, DLBS, DTYS, VGLT, UST, UBT, VGIT, TLO, TBX, GSY, TENZ, SCHR, ITE, DTYL, LBND, TYD, TYBS, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS
Thu, Jul. 3, 8:37 AM
- Stock futures (SPY, DIA, QQQ) remain little-changed, but the 10-year Treasury yield jumps to 2.69% from 2.63% following the strong June jobs report which saw payrolls gain 288K and the unemployment rate fall to 6.1%.
- TLT -0.6%
- Gold tumbles, now off 1.4% at $1,312 per ounce.
- GLD -0.9%
- Previously: Jobs gain of 288K; UE rate down to 6.1%
Wed, Jul. 2, 8:26 AM
- The 10-year Treasury yield pops higher by three basis points to 2.59% after ADP reports private job gains of 281K in June vs. 213K expected. May's 179K gain remains so, but earlier months saw a mix of revisions.
- TLT -0.4%, TBT +0.8% premarket
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, TYO, DLBS, DTYS, VGLT, BIL, UBT, UST, SHV, VGIT, TBX, TLO, VGSH, SCHO, GSY, TENZ, DTYL, SCHR, ITE, LBND, TYD, SST, TYBS, DTUS, DTUL, TUZ, TBZ, DLBL, DFVL, FIVZ, DFVS, TYNS
- Full report
Tue, Jul. 1, 11:30 AM| Comment!
Tue, Jul. 1, 10:20 AM
- New Orders of 58.9 rises from 56.9 in May. Production dips to 60.0 from 61.0. Employment is flat at 52.8. Supplier Deliveries drops to 51.9 from 53.2. Prices fall to 58.0 from 60.0. Backlogs fall to 48.0 from 52.5.
- Full report
- Previously: June ISM Manufacturing Index slips to 55.3
- Up two basis points ahead of the print, the 10-year Treasury yield remains so at 2.55%. TLT -0.9%, TBT +1.3%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
Thu, Jun. 26, 3:38 PM
- The St. Louis Fed chief is all over the place today - a TV interview, a speech, and a press conference - sounding the alarm over rate hikes, which he sees starting in Q1 of 2015. Investors and even some at the Fed are "stuck" in 2010, he says, and don't realize how close the central bank is to hitting its targets for unemployment and inflation.
- Responding to a question about why the yield curve remains below the median forecast of future rates presented by the FOMC last week: "I think investors should be listening to the committee, they are not." It seems central planners aren't pleased when markets have their own idea of what prices should be.
- Ignoring the Fed even more today, the short end of the curve is flat and yields are lower at the long end, the 10-year Treasury down 3 bps to 2.53%. TLT +0.6%
- Previously: Bullard: Forget about Q1 GDP report
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
Wed, Jun. 25, 9:03 AM
- The disappointing April durable goods print combines with yet another big revision downward in Q1 GDP to send the 10-year Treasuy yield lower by four basis points to 2.54%. The short end parties as well, with December 2016 Eurodollar futures up 7 basis points to 97.96 (higher Eurodollar futures mean lower rates), still pricing in about 200 bps of rate hikes between now and then.
- In addition to the headline miss in durable goods (-1% vs. +0.4% expected), core durable goods fell 0.1% vs. an expected 0.4% gain.
- Before doing too much buying or selling on these numbers, do note they're both old news. The durable goods number is from May and GDP is from Q1, and we're about to enter Q3.
- TLT +0.5%, TBT -1%
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, TYO, DLBS, DTYS, VGLT, BIL, UST, UBT, SHV, TBX, VGIT, TLO, VGSH, SCHO, GSY, TENZ, ITE, DTYL, SCHR, LBND, TYD, TYBS, SST, TUZ, DTUL, DTUS, TBZ, DLBL, FIVZ, DFVL, DFVS, TYNS
Wed, Jun. 18, 3:08 PM
- The decline in headline unemployment to 6.3% overstates the improvement in the labor market, says Yellen, explaining why the Fed plans on holding rates low even after the rate falls to 5.5%.
- At least part of the decline in the rate represents what Yellen calls "shadow unemployment" - discouraged workers who have exited the labor force, but would return if prospects improved.
- Markets are starting to take some direction, with the S&P 500 (SPY) now ahead 0.6% and the 10-year Treasury yield sinking four basis points to 2.61%.
- Asked an interesting question about whether Fed policy is at odds with itself - with one hand, the Fed wants credit to flow to help boost the economy, but with the other hand is stifling credit with new regulations - Yellen says the boosted oversight is needed to prevent another financial crisis, and from her seat credit is broadly available.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, TYO, DLBS, DTYS, VGLT, BIL, UST, UBT, TBX, SHV, VGIT, TLO, VGSH, SCHO, GSY, TENZ, ITE, DTYL, LBND, SCHR, TYD, SST, TYBS, DTUS, DTUL, TUZ, TBZ, DLBL, FIVZ, DFVL, DFVS, TYNS
- Previous FOMC/Yellen coverage
Wed, Jun. 18, 2:26 PM
- Ten-year Treasury yields are whipping around a bit, but are currently about as they were ahead of the Fed announcement, down three basis points on the session at 2.62%. The shift in dots, however, showing a slightly earlier/faster pace of rate hikes has 2015 and 2016 Eurodollar futures lower by 2-3 points (suggesting a higher Fed Funds rate).
- TLT +0.6%, TBT -1.2%
- Stocks are slightly higher than they were pre-announcement, the S&P 500 (SPY) +0.3%.
- Gold shows little reaction, up $1.50 per ounce to $1,273.50. GLD +0.25%
- The dollar (UUP -0.2%), (UDN) remains as it was before the announcement.
- Previously: Fed lowers 2014 GDP projection, but 2015 and 2016 hold
- Previously: Fed sees slightly faster pace of rate hikes
- Janet Yellen's press conference begins at 2:30 ET.
Tue, Jun. 17, 8:43 AM
- The higher-than-forecast 0.4% rise in the CPI in May (with core CPI +0.3% also ahead of estimates) sends Treasury yields higher, with the 10-year up two basis points to 2.62%. TLT -0.3%, TBT +0.6%. At the short end, Dec. 2016 Eurodollar futures are lower by 4 basis points (thus pricing in a higher Fed Funds rate at that time).
- Previously: May CPI at +0.4%, exceeds consensus
- On the flip side, housing starts in May disappointed, slipping 6.5% from April's pace. The annual rate of 1M is still 9.4% ahead of the pace in May 2013. Single-family housing starts in May of 625K were 5.9% lower than April.
- Building permits of 991K were 6.4% lower than April and down 1.9% from a year ago.
- Previously: Housing starts a bit shy of forecast
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, TLH, SBND, IEI, TYO, DLBS, DTYS, VGLT, BIL, UST, UBT, SHV, TBX, VGIT, TLO, VGSH, SCHO, GSY, TENZ, ITE, DTYL, LBND, SCHR, TYD, SST, TYBS, DTUS, DTUL, TUZ, TBZ, DLBL, FIVZ, DFVL, DFVS, TYNS
Thu, Jun. 12, 8:27 AM
- Back in his chair at Pimco, Paul McCulley declares mission accomplished not just on the war on inflation, but also for the Fed strategy of "opportunistic disinflation," along with what used to be called "pre-emptive tightening."
- The man who declared Alan Greenspan had hiked rates for the last time in his career shortly before The Maestro launched a multi-year series of rate hikes, says bond investors should ignore pricing inflation risk into bond yields and the true neutral real interest rte is likely close to 0% over the next few years, implying the Fed Funds rate won't go higher than 2%.
- ETFs: TBT, TLT, TMV, SHY, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, DLBS, VGLT, BIL, UBT, SHV, TLO, VGSH, SCHO, TENZ, LBND, SST, TYBS, TUZ, DTUL, DTUS, DLBL
Mon, Jun. 9, 11:46 AM
- The U.S. 10-year Treasury yield of 2.62% is 72 basis points higher than that of the G-7 average, the largest spread since April 2010, according to Bloomberg.
- Earlier this morning, the yield on Spanish 10-year paper fell below that of Treasurys, also for the first time since 2010.
- Trying to come up with a reason other than sheer madness, analysts point to the divergence of monetary policy between the U.S. and Europe, noting the ECB last week cut rates and hinted at QE, while the U.S. is tapering and eyeing rate hikes as soon as mid-2015.
- ETFs: TBT, TLT, TMV, TBF, EDV, EU, TMF, TTT, BWX, BNDX, ZROZ, SBND, TLH, DLBS, VGLT, UBT, PLW, IGOV, GOVT, TLO, ITLY, TENZ, ITLT, LBND, TYBS, DLBL
Fri, Jun. 6, 4:17 PM
Fri, Jun. 6, 8:45 AM
- Stock index futures add a little bit to gains following the inline jobs report, with S&P 500 (SPY) futures +0.2% and Nasdaq 100 (QQQ) + 0.25%. Russell 2000 (IWM) futures are ahead by 0.4%.
- Treasury yields are bopping around a bit, but the 10-year is unchanged at the moment at 2.57%. TLT +0.2%
- Gold has added about $1 an ounce since the report, now trading at $1,255. GLD +0.1%
- Lack of volatility continues in the currency markets, with the dollar (UUP) little-changed against all the majors.
- Previously: Job gains of 217K, inline with estimates
- Previously: More on jobs: Participation rate holds steady
Thu, Jun. 5, 10:35 AM
- Interesting action in the markets finds most doing a complete reversal of their knee-jerk response following the ECB rate cut and early part of the Draghi press conference (where he seemed to be laying the groundwork for QE).
- The euro (FXE) has turned around more than 100 pips and gone green on the session. Germany's DAX (EWG) and London's FTSE (EWU) have turned lower, though the periphery (EWI, EWP) is hanging on to gains. The 10-year Treasury yield - which jumped to 2.64% - has returned to 2.59%. TLT -0.1%, TBT +0.2%
- Showing little reaction in the immediate aftermath of the ECB action, gold is now moving noticeably higher at $1,253 per ounce. GLD +0.75%
- Previously: Negative rates not the end of moves for the ECB
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