Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Wednesday, January 26, 2011

Treasury Yields

David Beckworth asks:

To the extent the sustained rise in real yields is reflecting an improved economic outlook, can we not attribute some of that improvement to QE2?

. . . and shows a chart of the last several months of 10 Yr Treasury yields.  Sure enough, they're going up.

Does it mean much?  Maybe not.  Here is an up-to-date long-horizon chart from Yahoo Finance, showing where current yields are now, in a 30-year-long downward sloping trend channel that I eye-balled in.

There was a big underthrow almost 2 years ago.  Since then - pretty much business as usual.

As long as the curve is bounded by the trend lines, there's no real evidence that anything has changed.

Deja vu.  I made the same post, with more thoughtful commentary, about 6 weeks ago.  Today's chart is new, with data from Yahoo gathered today.



nanute said...

You're right. There is no breakout from the trend line. Furthermore, are real rates actually rising,(exceeding rates of inflation)? Have you looked at where rates were at the 30yr issues from say 2 years ago? As noted in David's comments, is this upward trend in rates a result of monetary policy, or is it something else? Like maybe concerns of fiscal austerity compounding the money demand problem? Just thinking out loud, as usual.

Jazzbumpa said...

Inflation is a tricky thing to measure. What do you use - core CPI, headline CPI, GDP deflator? Inflation is real, but measuring it is tricky indeed.

Also, it's tempting, and possibly very misleading, to look out side of a market for exogenous causes for change. Who knows what outside thing will be important today? Will it be important tomorrow?

I should repost with my attempt to put Elliot wave labels on the chart. I think we're in a counter-trend phase right now, with lower rates in the future.

Yes, this bodes very ill for my view of the economy going forward.

We need the new deal and we have the New Tea Party.


nanute said...

You are right inflation is a tricky thing to measure. Here's an interesting piece on how the Cleveland Fed is looking at the question: http://www.clevelandfed.org/research/commentary/2009/0809.cfm
By these measures, it looks as though expectations are for inflation in the range of 2% over the next 10 years. This does not account for the New Tea Party model of "spending", which will more than likely lead to a lower rate of inflation, and what Keynes called the "Paradox of Thrift".
I'm afraid your final analysis is correct.I'd add an F to your acronym.