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Tuesday, April 3, 2018 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 3/26/18 | 1.71 | 1.79 | 1.94 | 2.06 | 2.33 | 2.44 | 2.64 | 2.78 | 2.85 | 2.96 | 3.08 |
| 3/27/18 | 1.69 | 1.77 | 1.93 | 2.10 | 2.26 | 2.39 | 2.58 | 2.70 | 2.78 | 2.90 | 3.03 |
| 3/28/19 | 1.65 | 1.73 | 1.95 | 2.12 | 2.28 | 2.41 | 2.59 | 2.72 | 2.77 | 2.89 | 3.01 |
| 3/29/18 | 1.63 | 1.73 | 1.93 | 2.09 | 2.27 | 2.39 | 2.56 | 2.68 | 2.74 | 2.85 | 2.97 |
| 4/2/18 | 1.68 | 1.77 | 1.92 | 2.08 | 2.25 | 2.37 | 2.55 | 2.67 | 2.73 | 2.85 | 2.97 |
Source: U.S. Department of the Treasury, as of 4/2/18
Have We Seen This Movie Before …?
Investors are familiar with the standard disclaimer: Past performance is no guarantee of future results.
Nonetheless, it’s worth noting that in calendar year 2017, despite three (3) quarter-point hikes in the overnight target rate, long term interest rates peaked in March, as measured by 10-year USTNs at 2.62%, and continued to decline through September, bottoming-out at 2.04%.
Fast forward to 2018. Last month, the FOMC bumped its target rate by another quarter-point and since then, the 10-year Treasury yield has declined 20 bps from its year-to-date peak recorded on 2/21/18, at 2.95%. Of course the FOMC is widely expected to continue its policy of gradually raising short term rates, but this was also true in 2017.
The chart below is a 12-month regression analysis of 10-year USTNs. If bond prices continue to rally, the next resistance level would be a yield of 2.62%, or approximately minus one standard deviation below the mean rate, with even stronger resistance at a yield of 2.40%, which would represent minus two standard deviations.
Perhaps the recent decline in longer term yields will reverse course, as the rally in bond prices may be nothing more than an unsustainable response to a temporary sell-off in the equity market. If so, now may be a good time to reduce duration.
Then again, like last year, investors may be surprised by a further flattening yield curve.
Source: Bloomberg 4/2/18
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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