The "Rising" Interest Rate Environment

The following chart shows the natural log of the 6-month treasury yield. First, constant exponential growth (or in this case, decay) can be seen as a straight line. This makes it easier to see which way yields are growing and more importantly, how they are growing (or in this case, decaying). Second, using natural logs makes it easier to see the recent tiny movements in the nearly microscopic yields.


Click to enlarge.

As seen in the chart, there is little evidence that we shall be breaching the "line of death" anytime soon. We continue to drift away from it. Further, one might even argue that the bond market isn't expecting a robust Christmas season this year. Someone might argue that anyway and I certainly would not be the first to offer much in the way of a counterargument. I did manage to find someone who bought the breaching theory 5 months ago though.

April 2014
2014 Interest-Rate Outlook: Higher Rates for Borrowers, Little Change for Savers

The spread between short-term and long-term rates will grow. Here's what that means to you.

I absolutely love opinions stated as facts and what they must mean to me! Can't get enough!

Rising interest rates have been the talk of Wall Street—and Main Street—for months.

Months? Try years. Has this person been living in a cave since the Great Recession?

Despite the recent fluctuation in yields, the return on ten-year Treasuries has climbed more than one-half percentage point over the past 12 months, to 2.7%, and Kiplinger’s expects yields to reach 3.5% by the end of 2014.

There are just a few months left on the mythical 3.5% by the end of 2014 prediction. And while we are waiting for that, let me amuse you by describing the monkeys flying out of my, well, you know. Oh, yes. Here they come now! Very much the harbinger of higher real yields and renewed prosperity for all! Bottom yield monkeys for the win!!

Source Data:
St. Louis Fed: Custom Chart