rise of the treasury yield
The level of the yield on the U. S. Treasury 10-Year may be at the beginnings of a new era for the markets. It’s the same basic thing with the 2-Year.
That these yields are breaking above a downtrend line in effect since the Paul Volcker era of the early 1980’s — it’s a significant new factor from the standpoint of chart analysis.
Examining the long-term can be a good way to come back to earth after dealing with the day-to-day and the week-to-week. These point-and-figure charts are one of the best ways to re-connect with the most basic underlying trends. The movement in yields recently (the last few months) is surprisingly clear.
Here’s the p-n-f chart for the U. S. Treasury 10-Year yield:
10-Year U. S. Treasury Note pnf yield chart, 9 11 22.
Although little noted or mentioned in the financial media, this is a semi-astonishing chart. This year’s upward movement in the 10-Year yield takes it above a downtrend line in effect since, yes, that’s 1981. That’s 40 years of down until this year and now it’s reversed.
It’s impossible to know how high this will go but whatever the underlying causes are, it’s a new look for one of the most watched and basic of the yields measures. Maybe the T-Note will hit 4% and then come back down — or, now that the old trend is no longer in effect — maybe it will continue higher.
Here’s the point-and-figure for U. S. Treasury 2-Year yield:
2-Year U. S. Treasury pnf yield chart, 9 11 22.
Note how the yields have broken above the long-term downtrend from the Ronald Reagan era. This is the same look as the 10-Year yield and, as it continues higher, presents concern for bonds, stocks, real estate and anything else affected by higher and higher rates.
The point-and-figure chart for the 30-Year yield is here:
30-Year U. S. Treasury yield, pnf chart, 9 11 22.
That long-term downtrend line from the early 80’s has yet to be broken on the 30-Year yield chart. Note that a move to 3.50 would generate a “triple top breakout” from the 3.47 level. I leave it to others to analyze and discuss which “inverted yield curves” indicate oncoming recessions and which do not.
All that’s indicated on these point-and-figure yields charts is that, at least on the 10-Year and the 2-year, the movement upward is reaching concerning levels.
How these charts move after Tuesday’s CPI numbers might be telling. If they look inflationary, the Fed could move quickly to address the problem by taking interest rates higher.
Not investment advice. For educational purposes only.
