About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, June 10, 2013

Long Treasury Yield %

Here is a link to the 30 yr. Treasury Yield %: $TYX Daily 3 Year Chart

The yield on the long guy has been on the rise since late Jul. 2012 as the market began
to react to the Fed's commitment to a new and larger QE program. The 30 yr. yield has
been volatile and its uptrend has been comparatively mild, but it continues to forecast
stronger economic growth and an eventual resumption of upward cyclical pressure on
the inflation rate. Lately though it has diverged from my cyclical Treas. bond yield
indicator -- Industrial output + industrial commodities prices. You can see the positive
divergence of the Treas. from sensitive materials prices by comparing it to the recent
action of the $GYX (top panel), an industial metals price composite. The $GYX is not
on board yet, obviously, but sometimes the Treas. % will move faster than measures of
cyclically sensitive prices.

The yield on the long guy is rising to quite a premium to its 200 day m/a. It is in effect
overbought on the expectation of better economic growth ahead. The Treas. % can, of
course, get even more overbought short term but you should note how the market does
not tend to tolerate wide divergences from the 200 day m/a for too very long before there
is a snap back.

Corporate bonds continued to rally into 2013 even after the Treas. reversed course last
year with the price of the bond moving into a downtrend after mid - 2012. It is interesting
to note that recently, corporate yields (including junk %s) have also began to rise in
tandem with Treasuries. The rotation within the bond market in favor of courting higher
yields has run out of steam.

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