Have US Treasury Yields Bottomed? Are You Sure?

The consensus view is the Fed will hike 3-4 times in 2018 and that treasury yields long ago bottomed. Agree? I don't.

US Treasury Yields 1998-Present

The above chart suggests it is far too premature to believe that long-term yields have bottomed.

US Treasury Yields 5-year Duration and Under 1998-Present

Other than zero-bound 3-month treasuries, it is difficult to present a clear technical case that even short-term rates have bottomed.

And given that a huge percentage of the world's bonds trade at negative interest rates, one cannot make a legitimate case that any bond yields have bottomed.

Mike "Mish" Shedlock

Comments (9)
No. 1-9
CzarChasm-Reigns
CzarChasm-Reigns

It's a race to a BOTTOMLESS pit as the negative interest "can of worms" has already been opened.

Stuki
Stuki

Yields will have bottomed, when enough Americans have grown up sufficiently, to make default an option even Kramer and the rest of the investor drones can’t manage to miss. Then Big Foreign bond holders will scream bloody murder, and “remind” Americans of all the scary imaginary hobgoblins that lie in wait for those who don’t embrace their slave status with sufficient enthusiasm. To which the Trump voters will respond with: It’s Us vs The Foreigners! They took our jobs! We’re not paying them a dime! And then yields will rise. Unfortunately, it looks like we’ll be, if possible, even more like Venezuela than we already are, before growing up is in the cards.

Ambrose_Bierce
Ambrose_Bierce

Its pretty hard to consider any market in isolation. Euro junk is yielding less than UST?

clovisdad
clovisdad

The Fed asserts that it controls interest rates. If it does, it is hard to imagine it allowing much increase, as for every 1% rise in the discount rate, at some point Treasury debt service costs rise $200 Billion.

El_Ted0
El_Ted0

Mish is close to being the last Deflationist. We've got an inflationary Fed, ALWAYS an inflationary fiscal policy & inflationary tax reform looming. I don't see how interest rates go lower without a recession & major market correction.