Courtesy of Doug Short.
What’s New: I’ve updated the charts below through Friday’s close (July 5th). The yield on the 10-year note closed Friday at 2.73%, up from its 1.66% interim closing low on May 2nd. The rise of 107 bps in 44 market sessions is nowhere near the all-time record, which was 327 bps in February 1980. However that was when rates were in the 13% plus range. The latest surge, expressed as a percent (2.73 divided by 1.66 minus 1), is a 64% increase in 44 sessions — historically unprecedented over an equivalent timeframe. Note: That 327 bps rise in 1980 was a 32% increase, half of what we’ve seen of late.
The latest Freddie Mac Weekly Primary Mortgage Market Survey, published July 3rd, puts the 30-year fixed at 4.29%, off its interim high of 4.46% set the previous week (the highest since August of 2011).
Here is a snapshot of the 10-year yield and the 30-year fixed mortgage since 2008.
A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 Oil Embargo that triggered the era of “stagflation” (economic stagnation with inflation). I’ve drawn a trendline connecting the interim highs following those stagflationary years. The red line starts with the 1987 closing high on the Friday before the notorious Black Monday market crash. The S&P 500 fell 5.16% that Friday and 20.47% on Black Monday.
A Perspective on Yields Since 2007
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.
Now let’s see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior. It will be interesting to see how the index fares in as Q2 earnings season opens and the market potentially reassesses its dependency on Fed easing that might be nearing an inflection point.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective, which I update on weekends.
