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Post by liftlock on Apr 18, 2024 13:42:29 GMT
How many people think the Ten year treasury will jump back up to 5%? I don't have an informed opinion, but it seems quite possible. The short term trend in yields is up. The current yield at 4.6% is only 8 percent away from 5.0%. Inflation could surprise to the upside in the short term. www.cnbc.com/quotes/US10Y
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Post by Chahta on Apr 19, 2024 1:51:01 GMT
How many people think the Ten year treasury will jump back up to 5%? I don't believe it will. The Fed will make a cut before that happens.
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Post by mnfish on Apr 19, 2024 12:48:05 GMT
I don't think the 10yr rate has anything to do with the Fed cutting or not. In the short term, investor sentiment drives it more than anything.
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Post by yogibearbull on Apr 19, 2024 13:12:11 GMT
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Post by anovice on Apr 19, 2024 15:58:46 GMT
yogibearbull How do you read this StockChart to conclude that cuts is not expected soon?
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Post by racqueteer on Apr 19, 2024 20:13:17 GMT
yogibearbull How do you read this StockChart to conclude that cuts is not expected soon? I think it's the other way around. We know that cuts are not imminent, and rates have started rising to undo the effect of our anticipation of them dropping previously. No reason for rates to drop and, having gotten it wrong previously, some reason for them to continue rising to wind it back?
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Post by yogibearbull on Apr 19, 2024 21:49:25 GMT
Fed funds are where the Fed is now and 3-mo T-Bill yield is a good proxy of that. 2-yr yield is where the Fed may be headed, and that has risen to 5%, and may soon be where the fed funds are now. The 2-yr yield low was 4.12% in mid-January when the expectations for the Fed cuts were high (up to 5-6 cuts). But that has changed now and 2-yr yield is saying a Fed hold, not cut. Let up hope that 2-yr doesn't overshoot the current Fed fund range of 5.25-5.50% because that would provide fuel to those thinking about Fed rate hike.
5- and 10- yr are too far off from Fed rate control except indirectly through QE/QT.
There aren't many indications of what the Fed may do. The CME FedWatch is one, the 2-yr yield is another (OK, open-mouths of the FOMC are the noisy 3rd).
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Post by Fearchar on Apr 19, 2024 22:22:13 GMT
This is a few years old, but still relevant..... Stocks and rates move together until yields rise to more than x.x%, then move in opposite directions. At least, that is what history has shown. I won't speculate as to how high the 10 year might rise, but suffice it that it has risen sufficiently (>4.5%) for an extended period of time, that it probably no longer matters if you believe we are in living in a new normal or in the older 1965-January 2009 economy.
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Post by anitya on Apr 19, 2024 22:55:19 GMT
Fearchar, Do you have any insight into XLU price behavior YTD as 10 Yr rates went from 3.9 to 4.6%?
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Post by Fearchar on Apr 20, 2024 0:22:55 GMT
anitya, I hate to speculate, but probably do have some insight into XLU as I work for CEG; one of its larger components and by far the fastest growing. Utilities typically carry heavy debt and trade similar to bonds. So, most components will trade lower as yields rise. CEG on the other hand cashed in on going green with hydrogen production. Uncle Sam helped with a $1B award to build an hydrogen farm. This allowed the company to surprise to the upside with forward guidance. However, IMO it's speculative if that is sustainable or not. Maybe hydrogen will catch on, but then again it could just as easily explode like a bomb! As for the future, as yields lower, I would expect XLU to trend higher. However, currently high yields could easily linger for a long while. Just enough to tip the economy into a mild recession in which situation XLU will go no where fast. So, I remain among the more conservative investors on this board and fully content with predominately MM and RCTIX yields.
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Post by steadyeddy on Apr 20, 2024 2:28:00 GMT
How many people think the Ten year treasury will jump back up to 5%? I do think higher rates are in the making. And that is not a good news for stocks...
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Post by anitya on Apr 20, 2024 2:28:49 GMT
Fearchar, YTD, As 10 yr moved from 3.9 to 4.6%, XLU did not tank. If anything it went up a little, which is counterintuitive. But again, XLU did not recoup losses in Q4 as 10 yr yield retreated big. If you recall, I was trading XLU during Q4. The lesson I learned was, if I want to make rate bets, I should express that directly in fixed income rather than indirectly thru equity markets, however rate sensitive equities I might choose. That was a very costly lesson in opportunity cost I learned and repeating here for my own good, lest I forget.
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Post by mnfish on Apr 20, 2024 12:35:54 GMT
We have now set the record for the longest 2/10 inversion period since 1978 with no sign of a recession, so far. With the debt spending rising about $11T since Q1-2020 it's no wonder GDP stays positive. The longest delay between a yield curve inversion and the start of a recession was 22 months, which occurred from 2006 to 2008.
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Post by steadyeddy on Apr 20, 2024 13:09:53 GMT
How many people think the Ten year treasury will jump back up to 5%? I don't believe it will. The Fed will make a cut before that happens. As long as the CPI/PCE prints are elevated (beyond the Fed's 2% target), I think they will leave the ST rates alone. Instead, they would employ some behind the scenes tools such as stopping QT. I wish they never backed themselves into a corner of 2% inflation target being (almost) an absolute. It is not. Inflation that fluctuates in the 2% to 4% is perhaps acceptable (to me) but I am not the Fed -
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Post by yogibearbull on Apr 20, 2024 13:15:42 GMT
steadyeddy, the inflation target used to be +2% ceiling. But it was changed just a few years ago to +2% average. Some say that's what led to initial delay in Fed action - remember the transient inflation BS? Another was that POWELL's reappointment was sort of held up and he was the Fed Chair in limbo for many months.
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Post by steadyeddy on Apr 20, 2024 13:28:27 GMT
steadyeddy , the inflation target used to be +2% ceiling. But it was changed just a few years ago to +2% average. Some say that's what led to initial delay in Fed action - remember the transient inflation BS? Another was that POWELL's reappointment was sort of held up and he was the Fed Chair in limbo for many months. yogibearbull, correct. But given the recent press conferences of Chair Powell, he has been more emphatic about achieving 2% inflation - we are yet to see a single print less than 2% - and we require that for the average to tend towards 2%, right?
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Post by Chahta on Apr 21, 2024 12:50:55 GMT
It is my opinion that the 2% number is a talking point, a goal. If it works out that is good. But reality may set in and the Fed could pivot before seeing 2%. Political pressure may begin to prevail soon. It is easy to deal with 3% inflation for most of us that have enough assets to be retired. But 3% is hard on a lot of people.
It is amazing to me how expensive life is now. Mortgage rates are back over 7%. Gas is up sharply. More fossil fuel extraction is being shut down. New forced min. wage in CA is going to not help. Where has common sense gone?
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Post by racqueteer on Apr 21, 2024 13:21:50 GMT
I suspect that the limitation with oil lies in refining rather than pumping; that's the bottleneck. The political posturing is a whole other kettle of fish.
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Post by anovice on Apr 21, 2024 13:39:02 GMT
It is my opinion that the 2% number is a talking point, a goal. If it works out that is good. But reality may set in and the Fed could pivot before seeing 2%. Political pressure may begin to prevail soon. It is easy to deal with 3% inflation for most of us that have enough assets to be retired. But 3% is hard on a lot of people. It is amazing to me how expensive life is now. Mortgage rates are back over 7%. Gas is up sharply. More fossil fuel extraction is being shut down. New forced min. wage in CA is going to not help. Where has common sense gone? Gas prices have climbed nearly 14% this year. Here's why. "Over the past six years, excluding a pandemic-related anomaly in 2020, gas prices in the U.S. have risen an average of nearly 50 cents between Jan. 1 and late March" abcnews.go.com/Business/gas-prices-climbed-14-year/story?id=108652610
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Post by Chahta on Apr 21, 2024 16:14:06 GMT
If course it’s supply and demand. Most thinking people would increase supply. That is the faulty thinking currently.
Buy them EVs you fools, we are told.
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Post by Chahta on Apr 23, 2024 22:49:35 GMT
I don't think the 10yr rate has anything to do with the Fed cutting or not. In the short term, investor sentiment drives it more than anything. It doesn't directly. But long term rates don't stay up if there is no reason. When the Fed talked of no rate cuts or 1 rate cut this year the 10 year headed up. Mortgage rates need to come down and will follow the 10 year's lead.
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Post by fishingrod on Apr 23, 2024 23:29:05 GMT
I don't think the 10yr rate has anything to do with the Fed cutting or not. In the short term, investor sentiment drives it more than anything. It doesn't directly. But long term rates don't stay up if there is no reason. When the Fed talked of no rate cuts or 1 rate cut this year the 10 year headed up. Mortgage rates need to come down and will follow the 10 year's lead.
Yep, take the carrot away, the horse will eat grass again.
But, It really depends on inflation.
It may take a long time.
But, it will happen.
Right?
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Post by Chahta on Apr 24, 2024 0:28:32 GMT
It doesn't directly. But long term rates don't stay up if there is no reason. When the Fed talked of no rate cuts or 1 rate cut this year the 10 year headed up. Mortgage rates need to come down and will follow the 10 year's lead.
Yep, take the carrot away, the horse will eat grass again.
But, It really depends on inflation.
It may take a long time.
But, it will happen.
Right?
The political pressure will be too great this election year.
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