Part 2 of our overzealous post started Monday that was a bit too long- Enjoy!
There’s an old saying that the smartest guys in the room are the Bond Market or Bond Market Participants.
Bond market participants have way less to think about than their brotherin equity market participants, Basically bond participants only think of the economy, the credit worthiness and length of their investment.
Using the USA as your proxy and with the United States being the most credit worthy bond in the world, there is one less thing bond market participants have to worry about. Taking a peek at the 10-year US treasury yield which would reflect mostly economic expectation or possibly the future growth, of course there could be outside investors rushing to the US treasury market in search of higher yields boring the matter a bit, but all other things set aside under the surface post speech bond market investors are expecting greater controlled economic growth, sooner (2 year Movement.)
Dramatic Movement in the 2 Year Treasury
In order to get a most up to date chart, we needed to use futures contracts, so bear with us, as the chart goes down the yield is rising… bond guys are pricing higher rates now!
Here is a close up of the latest few days, again on the 2 Year
Not surprisingly a bit of a come back (higher prices lower yield) in the chart after such a large move.
30 Year Movement
Same use of futures contract here…
Higher chart price is lower yield? The initial drop is in the February March 2021 time frame as the Economy began to open, but take note of the move UP – lower yields in the last few weeks!
This may seem counter intuitive, but the eventual increase in rates would thwart inflation and is being expressed by lower long term rates…
We’ve talked at length on inflation versus deflation, so will leave it alone at this time but it might be noted that’s the smartest guys in the room thank future economic growth is at least higher and longer term inflation is not their concern, at least for now!
Have a Great “FOMC – Smartest Guys In the Room Review” Day!
John A Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
Quick Update on Treasury Yields…. 2 Year and 10 Year Treasury Yield Down, Price Up, Good for Stocks at the Moment but ….
With a road trip happening as you read this…. was a bit short on time for our mid-week post…. links in this post explain a lot….
Wanted to draw your attention to the move in US Treasury yields/bonds (and show off our new Koyfin technology too) …. this is the 2 and 10 year (still inverted- more to come on this- digressing) ….more importantly, the sudden drop, commenced by an FOMC meeting and then reinforced by weaker Employment data has bond interest rates down, bond prices up…..
This move down in yields has initially pushed Stocks up, and bond portfolios UP… we are cautious to call a victory lap on this bond and interest rate movement, but again worth noting…..
More importantly, bonds go up and rates down, under this circumstance because the smart guys in the room… are pricing in a slowing of the economy…. NOT usually good for Stocks…. after the candy wears off!
Have a Great “Quick Deeper Dive/Second Level Thinking on Rates” Day!
John A. Kvale CFA, CFP
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Posted in Interest Rates, Investing/Financial Planning, Market Comments
Tagged 10 Year, 2 Year, Inverted, Inverted Yield Curve, Smartest Guys in the Room, Treasury