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.
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3 comments:
Jazzbumpa:
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.
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.
WASF,
JzB
Jazzbumpa,
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.
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