Let’s See How US Treasuries are Anticipating Bernanke Testimony

Yesterday yields rose again across most of the spectrum, and the Bankrate.com overnight mortgage rate for 30-fixed and fixed refi mortgages have broken above 5%. The charts below are updated through February 8. Equity markets in the U.S. are setting new interim highs, but savers and prospective home buyers and refi customers have little to celebrate.

The behavior of Treasuries is an area of special interest in light of the Fed’s QE2 strategy. The first 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.

Here’s a closer look at the past year with the 30-year mortgage added to the mix.

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

How much have yields risen? This chart shows the percent change over the same timeframe for a basket of eight Treasuries. As we readily see, yields are accelerating dramatically.

The yield spread had been widening in November and much of December, then contracted, and now show renewed signs of widening. The next chart shows the 2- and 10-year yields with the 2-10 spread highlighted in the background.

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