Let’s See How US Treasuries are Reacting to Fed QE2

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 (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.

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

The yield spread has been widening over the past couple of months. However, the pattern of rising yields at the short end probably runs counter to the expectations of a Federal Reserve that has set the Target Rate to 0.00 – 0.25. 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.