Treasury Yields: A Long-Term Perspective

Let's have a look at a long-term perspective on Treasury yields. The chart below shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%. Last week's rally in yields has been much more dramatic than the 1.98% weekly close - Thursday's 10-year note closed at 2.15%, a 32 BPS increase from before the election. The first three charts below are based on weekly averages of daily closing yields.

Now let's overlay the S&P 500 to see historical pattern of equities versus treasuries. This is a nominal chart, which significantly distorted the real value of both yields and equity prices.

10-year Yield since 1962