Tuesday, May 19, 2009

10-Year Treasury Note Yield

The chart looks very bullish, and that's what you exactly DO NOT want, particularly if you are a Fed official. It means the yield may go a lot higher, which will make the interest rates on mortgage loans much higher.

The chart plots the YIELD (not price, which moves inverse to the yield) of 10-year Treasury note (TNX). It is a weekly chart to elminate daily noise. As you can see, it is above both EMAs and is poised to go higher. RSI doesn't have much more wiggle room; it will either break up the descending trend line from 2007, or break down the support line from December 08 low.

If you further eliminate the noise and look at the Point and Figure chart of TNX, it shows the target at 50. The target price of a P&F chart doesn't always happen (the reverse signal will be given if TNX goes down below 30), but the prospect of having 5.5% yield on 10-year note in this economic condition is certainly not what the government would want.

The Fed's quantitative easing started on December 08, and the effect lasted until January 09. Not much of an effect, I would say, but the Fed claims that the yield would be much higher without their intervention. Maybe.

No comments:

Post a Comment