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Thursday, August 30, 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 |
| 8/23/18 | 1.94 | 2.08 | 2.23 | 2.43 | 2.61 | 2.66 | 2.72 | 2.78 | 2.82 | 2.90 | 2.97 |
| 8/24/18 | 1.95 | 2.09 | 2.25 | 2.44 | 2.63 | 2.68 | 2.72 | 2.78 | 2.82 | 2.89 | 2.97 |
| 8/27/18 | 1.96 | 2.12 | 2.25 | 2.47 | 2.67 | 2.70 | 2.74 | 2.81 | 2.85 | 2.92 | 3.00 |
| 8/28/18 | 1.96 | 2.13 | 2.28 | 2.47 | 2.67 | 2.73 | 2.77 | 2.84 | 2.88 | 2.96 | 3.03 |
| 8/29/18 | 1.97 | 2.13 | 2.28 | 2.48 | 2.67 | 2.75 | 2.78 | 2.85 | 2.89 | 2.96 | 3.02 |
Source: U.S. Department of the Treasury, as of 08/29/2018
YIELD CURVE GOES VIRAL
The Treasury yield curve appears to be getting its 15 minutes of fame. Everyone, not just the bond-nerd community, is following and debating the importance of the flattest yield curve since 2007. In fact, Google noted a spike in searches for yield curve on Tuesday of this week when the 2 to 10 year spread dropped under 20 basis points. In fact, The Federal Reserve of St. Louis reported Monday that the 2 to 10 spread has taken over from the perennial favorite, the Consumer Price Index (CPI), as its most closely watched figure.
There has been much speculation that the Fed will have to halt its increases in order to avert an inverted curve if indeed the longer end refuses to budge. Treasury Secretary Steven Mnuchin this week said that he was “not at all concerned” about the shape of the yield curve. He also gave Fed Chairman Jerome Powell, who has been a target of presidential criticism, a vote of confidence.
So will a flat, or even more dramatic, inverted yield curve be once again a reliable precursor to recession? Many factors will play into the final outcome. Certainly, the attractiveness of U.S. markets has played a major role.
Check out the charts below and two trends clearly standout:
1. U.S. Equities, highlighted by the NASDAQ’s phenomenal 17.41% increase have for the most part outpaced
the global stock markets which for the majority, are negative for the year.
Source: Bloomberg 08/29/18
2. U.S. 10 year Treasury at 2.88% is very attractive compared to almost all other credit worthy issuers.
Source: Bloomberg 08/29/18
As long as those two remain constant, it would appear that the powers that be are comfortable with a “gradual rate-hike” policy.
The Treasury yield curve appears to be getting its 15 minutes of fame. Everyone, not just the bond-nerd community, is following and debating the importance of the flattest yield curve since 2007. In fact, Google noted a spike in searches for yield curve on Tuesday of this week when the 2 to 10 year spread dropped under 20 basis points. In fact, The Federal Reserve of St. Louis reported Monday that the 2 to 10 spread has taken over from the perennial favorite, the Consumer Price Index (CPI), as its most closely watched figure.
There has been much speculation that the Fed will have to halt its increases in order to avert an inverted curve if indeed the longer end refuses to budge. Treasury Secretary Steven Mnuchin this week said that he was “not at all concerned” about the shape of the yield curve. He also gave Fed Chairman Jerome Powell, who has been a target of presidential criticism, a vote of confidence.
So will a flat, or even more dramatic, inverted yield curve be once again a reliable precursor to recession? Many factors will play into the final outcome. Certainly, the attractiveness of U.S. markets has played a major role.
Check out the charts below and two trends clearly standout:
1. U.S. Equities, highlighted by the NASDAQ’s phenomenal 17.41% increase have for the most part outpaced
the global stock markets which for the majority, are negative for the year.
Source: Bloomberg 08/29/18
2. U.S. 10 year Treasury at 2.88% is very attractive compared to almost all other credit worthy issuers.
Source: Bloomberg 08/29/18
As long as those two remain constant, it would appear that the powers that be are comfortable with a “gradual rate-hike” policy.
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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