How Treasury Rates Are Behaving During A Big Economic Week

I’ve updated the charts below through April 12th. The early signs of a correction in U.S. equities have been accompanied by a rise in Treasuries and a decline in yields (which move in the opposite direction). The question is whether this reversal in Treasuries has staying power.


The behavior of Treasuries is an area of special interest in light of the Fed’s second round of quantitative easing, which was formally announced on November 3rd. The first chart shows the percent change for a basket of eight Treasuries since November 4th.

Click to View

The next chart shows the daily performance of several Treasuries and the Fed Funds Rate (NYSE:FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the New York Fed’s website for the FFR.

 

Click to View

Here’s a closer look at the past year with the 30-year fixed mortgage added to the mix (excluding points).

 

Click to View
Here’s a comparison of the yield curve at the time of the Fed’s QE2 announcement and the latest curve.

 

The yield spread had been widening in November and much of December and since then has contracted a bit. The next chart shows the 2- and 10-year yields with the 2-10 spread highlighted in the background.

 

Click to View

The final chart is an overlay of the CBOE Interest Rate 10-Year Treasury Note and the S&P 500 (NYSE:SPY).

 

Click to View

Doug Short Ph.d is the author of dshort.com.

Improve Your 2011 Financial Health: Join the winning team of stock pickers with Wall St. Cheat Sheet’s acclaimed premium newsletter >>