Anyone got a good reason why the 10 year note is going to yield 3.75% or more? Cause those are some of the numbers I have been hearing.
You ask - "Why are interest rates rising?"
Interest rates and bond yields, as you well know, have been at all time lows and bond prices at all time highs. This is because our Federal Reserve Bank has been manipulating the treasury market by buying $85,000,000,000 worth of treasuries every month (QE) and keeping the overnight lending rate at zero.
Now that the $85 billion is going to be reduced the floor for high bond prices is gradually going to be taken away. Bond investors now demand a higher yield before buying to compensate for taking the risk of possible rising rates and falling bond prices.
The Fed’s bond-buying is fueling inflation expectations, just like it did during QE1, QE2 and Operation Twist. The following are the dates of each QE iteration, the 10-year yield at the time the QE began (or was announced), and the level of the rates at the end of that particular QE.
QE1 begins: 11/25/08 (3.1%)
QE1 ends: 3/31/10 (3.8%)
QE2 telegraphed (Jackson Hole speech): 8/27/10 (2.7%)
QE2 ends: 6/30/11 (3.16%)
QE3 begins: 9/13/12 (1.76%)
Current 10-year yield (as of today): 2.03%
Bottom line is that the Fed's bond-buying efforts are counter-productive, and accomplishing the exact opposite of the Fed's stated goals. Contrary to popular belief, rates fell (sometimes dramatically) each time QE ended.
Interesting. If this repeats, then when the latest round of QE stops, rates will drop. If at the same time the world economic recovery accelerates (not saying it will but it is looking increasingly like that is possible), the USA could be sitting quite pretty... low rates heading into an upcycle...
U.S. 10 year yield is 2.88% as of today. That's over a 100 bps increase in the last year from their bond buying program. If interest rates keep rising at this rate, since about May, we are going to see some serious economic dislocations, if it already has not started. I am hearing some anecdotal in the real estate markets that things are slowing down quickly.
Sentiment: Strong Sell
i think u are correct... let bonds suck up liquidity with higher yields and then after 1-3 months of higher rates
2% 5yr 3.5 10yr and 4,50%30 yr mkt discounts equity cashflows and bonds rally... stocks sell off as well but
What makes you think the government's 1980 data is any more reliable than today's government data? MIT's Billion Prices Project has actually been tracking the government's data quite closely for the past five years, which would indicate that the government's revised methodology is actually fairly accurate.
If it were that simple, why would Japan, with twice the public debt to GDP ratio as ours, have an interest rate of 1.81% for its 30-year bonds, while ours is now over twice that, at 3.86%? Does anyone really expect Japan to be able to repay those bonds without a heavy dose of inflation? Once you examine that conundrum, you have entered into the rabbit hole that is the bond market, which defies “simple” explanations.
Many large US Investors were waiting for the Euro countries to announce Crisis .
They just announced some of their economies are performing much better than the USA.
Under Merkel they will raise rates. The Euro triumphs while the US $ languishes.
That is why the US long bond % rate rose higher Friday.
The US $ is turning into the North America Peso.
New Federal reserve to replace Bernanke could raise rates to prevent inflation.
2008 US Bank Bailout costs the US citizens $5 trillion in debt or 1/3 of our new debt.
US economic situation is not a pretty picture.