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U.S. Treasury Yields: The 10-Year Probabilities

Jun. 29, 2021 11:22 AM ETTLT, TBT, IEF, SHY, EDV, IEI, TMV, VGSH, VGLT4 Comments


  • It's more important to understand that the probability of heads in a coin-flip is 50% than it is to guess heads or tails.
  • The same is true for interest rates, a lesson learned the hard way by many including the author.
  • We present this week's 10-year distribution for future 3-month Treasury bill yields for 20 points in time.
  • Looking for more investing ideas like this one? Get them exclusively at Corporate Bond Investor. Learn More »
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One of the most fruitless exercises in finance is trying to predict interest rates. Most investors have proven this to themselves over the years by learning from their mistakes. In addition to my own mistakes, I learned this lesson from various wise and

For a daily ranking of the best risk-adjusted value of corporate bonds traded in the U.S. market, please check out a free trial of The Corporate Bond Investor.  Subscribers are actively arbitraging 160-year-old legacy credit ratings using modern big data default probabilities from Kamakura Corporation.  Remember, the Pony Express and credit ratings were both invented in 1860.  Are you still using the Pony Express?

This article was written by

Donald van Deventer profile picture

Dr. Donald R. van Deventer has been in the risk management business since completing his Ph.D. in Business Economics at Harvard University in 1977. He founded the Kamakura Corporation in 1990 after 13 years with two of the 10 largest banks in the US and a stint as investment banker in Tokyo. He joined SAS Institute Inc. as co-head, of the Center for Applied Quantitative Finance in 2022 when SAS acquired Kamakura Corporation. At the time Kamakura was acquired by SAS, Kamakura's institutional clients had total assets or assets under management of 48 trillion dollars.

He leads the investing group Corporate Bond Investor to bring Kamakura's state-of-the-art risk analytics to individual investors. The analytical processes underlying the Corporate Bond Investor are identical to those provided to institutional investors by SAS Institute Inc. He also provides a daily ranking of corporate bonds by best risk-adjusted return. His investing group is currently the only one on Seeking Alpha to focus exclusively on corporate bonds.

Analyst’s Disclosure: I am/we are long TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author owns a portfolio of Treasuries and Corporate Bonds disclosed quarterly to subscribers to The Corporate Bond Investor.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

hawkeyec profile picture
@Donald van Deventer

I love your articles. You focus on the important truth in the statistics you use. As you said, "It's more important to understand that the probability of heads in a coin-flip is 50% than it is to guess heads or tails." Totally true but I have tested executives, students and others on this question and they do not believe this fact. Most people think that flipping eight heads in a row raises the odds the next flip will be a tail. Thanks for your candor and for sharing your data.
Donald van Deventer profile picture
@hawkeyec Thanks for the great comment. Daniel Kahnemann's book Thinking Fast and Slow covers that perception problem in depth. It's a great read, even the 2nd or 3rd time!
Adamantium profile picture
“Because computers work for free on the weekend…” classic!
Donald van Deventer profile picture
@Adamantium I often hear from bankers and regulators that they can't do this or that because the "calculation takes to much time." That's usually not true, but even if it is the machines never complain about being busy.
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