Posted by 21 June 2007

Have 10 Year Interest Rates Turned the Corner?

the other day Jeff asked me to contrast the short term 10 year treasury yield chart I posted with a longer term chart. Here’s the short-term chart I posted last night which shows a clear uptrend since March:

Jeff mentioned that there’s been a lot of debate about whether or note the longer term trend for the 10 year note is still down or not. I think these charts show that the long-term trendline has been broken. First is a quarterly chart going back to the 1970′s:

Here’s the same trendline on a monthly chart. You can see that rates tried to breakout last year but failed. They had a small pullback and broke through the trendline this month. I think the trendline to be concerned about now is the uptrend from the 2003 low.

RSS Feed Subscribe to get Free Updates.

Comments

  1. Posted by Jeff on June 21, 2007 at 11:58 am

    Thanks, Mike.

  2. Posted by Declan Fallon on June 21, 2007 at 6:20 pm

    Robert New on his Stockchart list also noted the long term breakout in 10-year yields:

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID897936&cmd=shows98033799&disp=P

    Best wishes,
    Declan

  3. Posted by Michael on June 21, 2007 at 6:31 pm

    Thanks Declan

  4. Posted by Duru on June 21, 2007 at 7:21 pm

    Hmmm….I was using a log chart and that tells me the big break-out didn’t quite happen. Anyone confirm or call me crazy?

  5. Posted by Michael on June 21, 2007 at 7:33 pm

    The two TeleChart charts I posted are also logarithmic

  6. Posted by Duru on June 21, 2007 at 9:03 pm

    Shnap. Then call me crazy then. Not sure why I got (and still get) a slightly different trend line when I drew it.

  7. Posted by cemays on June 22, 2007 at 4:02 pm

    Not sure why you would use logarithmic charts for 10 year treasury yield charts. Seems like a linear chart would be more appropriate. The yields are not like stocks that can double in a given time frame and then to double again you would want the logarithmic chart so you are seeing the growth of the stock. The yield will not double and then double again.

  8. Posted by Michael on June 22, 2007 at 5:25 pm

    Cemays,

    It wasn’t really a conscious decision. All of my charts are set to default to logarithmic. I wasn’t even thinking about it.

    For what it’s worth, I just switched the chart to arithmetic and doing that shows that rates broke their downtrend in 2005.

  9. Posted by Duru on June 24, 2007 at 4:26 am

    Interesting. I know there is some controversy over log vs arithmetic, but I get particularly curious when the two views produce dramatically different results.
    Anyway, I went back and checked myself. I realized that I was being a bit lazy in drawing the trendline. Perhaps I care too much about this, but given a spike in rates has caused some big meltdowns in the market in the past (like 1987, some say 2000), I want to stay on top of this one!

  10. Posted by Duru on June 24, 2007 at 4:29 am

    Good thing you’re here to keep us honest.. :d