U.S. 10 Year-Treasury Yield Trendline

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Chart of the week: 02/04/2019 – 02/08/2019

U.S. 10 Year-Treasury Yield Trendline


10-Yr Treasury Yield: Ordained to move upward or destined to move downward?

For the last several decades, the yield on the 10-yr U.S. Treasury bond has been on a downward trend. In spite of the many instances along the way when it appeared that the trend was reversing, the yield eventually changed course and proceeded to reach a new low.

Since touching its all-time low of 1.36% in July 2016, the 10-yr yield has trended higher, rising to 3.24% in November 2018 and breaking through the upper bound (orange line) of its longer-term down trend.

In the past, as depicted in the chart, these inflections have in some instances preceded market declines and recessions.

This most recent breach of the upper bound and the subsequent hint of a reversal raises some interesting questions.

Does the 2.5 year uptrend from its low in 2016 mark the end of the long-term downtrend, or is it merely a blip up on the way to even lower rates?

Is this recent breach of the upper bound signaling a stock market downturn or even a recession?

How might this affect Fed policy?

As the answers to these questions unfold, they will carry significant implications for investor portfolios.

Unless otherwise noted, data is sourced from Bloomberg.
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