No, we won’t be loading up on 10-year treasuries anytime soon, especially after seeing yields spike from 2.5% to over 2.7% last week (which represents a sharp bond rout) just based on a few better than expected data points for the ISM manufacturing index and private payrolls.
However, Econompic has an interesting depiction of what 2.7% 10-year yields represent, making them less extreme than they appear.
Basically, a 2.7% yield doesn’t price-in simply 10-years of 2.7% interest rates going forward. It also prices-in two years of ultra-low rates, combined with eight years of low-but-substantially-higher-than-2.7% interest rates.
Thus one needs to factor in the Fed’s extreme near-term distortion of the credit markets. This is shown below by the blue line, and makes treasury yields appear a bit less wild:
(Chart via Econompic)
Business Insider Emails & Alerts
Site highlights each day to your inbox.