When did rates bottom?

A fun chart I whipped up looking at Treasury bond yields by maturity, just for a frame of reference now that everyone’s carrying on about rising rates.

The truth is, rates have already been rising, for quite some time.

The long bond in the top pane finally found a real bottom in the summer of 2016 as the economic data around the world began to materially improve all at once. Global yields had dragged it down, so normalizing global yields were the only elixir. The Brexit non-event turned out to have been the signal. Who knew? Maybe this was the big, bad thing that investors were waiting to see us get past before raising their own expectations.

The 10-year Treasury played along, bottoming at pretty much the same time.

But the 5-year had already put in its lows years earlier after the Taper Tantrum in the summer of 2013. It had not revisited them in the summer of 2016 as longer-dated maturities made their ultimate lows.

Same for the 2-year and for 3-month paper. Bumping along the bottom and then a noticeable lift as the Fed began to raise overnight rates very slowly, deliberately and transparently.

We’ve been hearing about a bond catastrophe in the making for quite a while now. Meanwhile, rates have risen very gradually and the central bank has never been more open about their moves, telegraphing their actions in a way that watchers of the Greenspan era could only have dreamed of.

No such crisis has taken place yet as the Fed first began buying less during QE, then buying none, then began to talk about slowly winding down its portfolio. Overall, fixed income market participants have been extraordinarily well-behaved. Liquidity has not been a problem.

Bears will now screech at me that it’s because Bank of Japan and the ECB have picked up the slack and covered the Fed’s exit. Okay, so what? Was that some sort of shocking development that no one could have foresaw?

There’s a new guy running the Fed. His boss (let’s not kid ourselves about independence) is a President who loves to borrow money and makes it a point to reference the soaring stock market every time he finds his mouth in front of an open microphone. There’s no reason to think the pace of gradual hikes and constant market communication is going to change much through 2018.


This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web