Skip to main content

Posts

Showing posts from February, 2020

Treasury yields have plunged over the last 12 months. What's next?

At the end of January 2019, the 10-year treasury yield stood at roughly 2.7%.  Fast forward 12 months later, and the 10-year yield has dropped to below 1.5%.  In other words, this is a 44% collapse in one year which helped usher in an epic bond rally.  Having just occurred, how does this dive in the 10-year yield compare to past periods and what does this reveal about the likely path forward in long-term rates?  Looking back to 1963, this posts will review other times where the 10-year treasury rate rose or declined by at least 20% on a year-over-year basis (monthly closing basis).  Doing so will hopefully provide context as to how far long-term rates have dropped in such a relatively short period of time. (*The blue line is the 12-month rate-of-change of the 10-year treasury yield while the black line is the absolute level.  The dotted red and green lines are the +20% and -20% year-over-year (YOY) thresholds that will be used throughout this post.) ...