Courtesy of Doug Short.
Note from dshort: The stock market was closed today but a shortened Treasuries session gives us some clues as to the market reaction to this morning’s weak employment report.
Treasury yields have been a bit of a roller coaster ride for the past few months. The 10-year note had been hovering around the two percent level for the past few months after hitting its historic low of 1.72 immediately following the September 21st announcement last year of Operation Twist. Despite the Fed’s stated purpose of lowering long-term interest rates, the 10-year steadily rose to an interim high of 2.42 on October 27th, but it soon settled into a pattern of hovering around 2.00 with the one quick dip to 1.82 and an upper range of 2.11. But in mid-March the yield on the 10 surged to a closing high of 2.39 on March 19th and then declined to a hover range around 2.23.
Today’s disappointing jobs report triggered a bond rally with the yield on the ten falling to 2.07 at the close, a decline of 12 basis points from the previous close.
Here is a snapshot of selected yields and the 30-year fixed mortgage since the inception of Operation Twist.
Background Perspective on Yields
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.
Here’s a closer look at the past year with the 30-year fixed mortgage added to the mix (excluding points).
Here’s a comparison of the yield curve at two points in time: 1) today’s close and 2) the daily close on the market’s interim high on April 29th.
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.
The final chart shows the percent change for a basket of eight Treasuries since the initiation of the second round of quantitative easing on November 4th, 2010.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective.
