Wednesday, June 23, 2010

Ten Year Treasury Yield Hits a 52-Week Low

This is exactly the reason that I started with a very small short position on the TLT ETF that tracks the 20 year Treasury's. As short term rates such as the federal reserve can't go any lower these longer dated rates do have room to the downside. The question is, just how low can they go? As I had mentioned in an earlier post the average move in the TLT is 13 times that of the 20 year rate. With 20 year rates near 4% that would leave about 52 points of upside for TLT which would put rates 20 year out at zero. I think that this is highly unlikely. In the height of the financial crisis and credit freeze these rates went as low as 2.8%. This leaves about 1% of downside in my opinion and thus would allow me to load the boat with a TLT at about 113. Otherwise I will just nibble until further notice.


Sent to you by Dominic via Google Reader:


via Think BIG by Bespoke on 6/23/10

Remember back in April when the yield on the ten-year was approaching 4% and everyone seemed to be worried that the era of low rates was over?  That didn't last long.  Less than three months later, the ten-year yield is not only lower, but it's also on pace to close today at a 52-week low of 3.14%.  Since April's peak in interest rates, there have been no shortage of concerns popping up regarding Europe and the strength of the US economy.  However, it is somewhat ironic that the ten-year yield is on the verge of a 52-week low on the same day that the Business Roundtable's index of CEO Outlooks hit a four-year high.  In its latest survey, the Business Roundtable found that, "our member CEOs plan to continue hiring and expect improved sales."  Who will be right? CEOs or the bond market?

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1 comment:

  1. I think I'll use this opportunity for my entry point. I'll take a look at the opportunities tonight.