Yesterday the 10 year US Treasury Bond did something it has not done in some time …. reach a yield of 3%.
The Yield Curve – Interest Rates
We have been preparing for some time a multipart series about interest rates and the yield curve its self, and with the recent move in rates higher (finally) the timing could not be better. You will see a lot about this in the coming weeks if you peer into the Financial Section on your computer, periodical or tablet view … so we wanted to prep in advance.
This discussion will be multipart analysis, discussion, education and conclusion …. we hope you enjoy (we think you will as there is a terrific conclusion).
While the chart above shows the most popular “Headline” rate for most, it is really just one part of a series of rates …. here is where our discussion is born… so let’s go!
Liking to keep things simple, this is a self drawn chart that we will build upon, but gets the point across.
The longer something takes, generally the more it should cost. (Greater risk of loss)
Said another way, the more time something takes, the more it should cost.
If you loan a buddy $100 bucks today to be repaid tomorrow, it is less risky than if you give it to him for a year and hope to get it back! Right?
Our self made chart shows just this, the longer the time, the greater the cost.
Looking again at our chart, we could say the term is anywhere from one day going all the way out to 30 years, with the afore mentioned 10 year term being near the right end of the chart.
This chart shows what could be called a normal yield curve or cost situation.
Next up … Change!
Have a Great “Yield Curve Discussion” Day!
John A. Kvale CFA, CFP
Who brought the Grinch to a usually Happy December Markets – Three Possible Items
As we have mentioned here and here, November and December are historically the best times for markets, with the latter having pole position.
While no one knows for certain, and we are watching a ton of different indicators, here are three items of note, worth reviewing.
Three Grinch items to review
Inversion Watch – 10 year treasury yield
We have spoken tons of time about the inverted yield curve and a major part of that curve as well as the inversion, is the current rate of the 10 year yield. This chart shows the recent movement of the 10 year yield moving down – this could be expectations of a slower future economy/growth OR it could be just some big money buying bonds – either way, a Grinch twinge to the capital markets.
Technical testing of markets
Oddly, even as we mention in this post the Grinch – in reality the capital market participants are taking their sweet time to test and re-test their levels – ignoring the happy months of November and December – Whatever makes you happy guys!
Is Sentiment Grinchy? – Worth Watching
With 2/3rds of GDP (Gross Domestic Product) being consumer spending, consumer confidence is one of the most important parts of the economy – No Grinch here!
Capital Markets have forecasted many more bad times than have occurred – but in so doing they have also accurately forecasted “Bad Times!” – For now, we are doing our “No Grinch” dance, but watching closely and respecting all!
Have a Great “No Grinch” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Economy, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments
Tagged 10 Year, 10 Year Treasury, Consumer Sentiment, Inverted Yield Curve, Technical Analysis