Thursday, December 4, 2014

10-Year Treasury Yield "Fair" Value: 2.15%

The following chart shows the 522-week (~10 years) moving average of the 10-year treasury yield.

Click to enlarge.

Since the trend in the 10-year moving average is falling linearly, one need simply look 5 years ahead to find out what the "fair" value of the current 10-year treasury yield could be. The result is 2.15%. This compares favorably to today's actual yield of 2.25%.

Our debt-based economy apparently requires the 10-year treasury yield to drop 2.3% per decade. Is this really a surprise? The more debt we take on the lower interest payments must be lest the economy fall apart.

Since the 10-year treasury yield is now below 2.3% and cannot fall below 0%, one can't help wondering what the next decade is going to be like. If one happens to be a long-term permabear, one might even wonder what the decade after that is going to be like.

No worries though. In the meantime, let's just party like it's 1999.

This song never gets old to me. It's almost as good as the clown horn.

Source Data:
St. Louis Fed: 10-Year Treasury Yield

1 comment:

Stagflationary Mark said...

Keep in mind that there's nearly 30 years of data in this chart.

The data point for January 1998 is a 10-year moving average. It therefore includes data going all the way back to 1988.

I would have gone back further, but the data was less stable coming out of the 1970s. There was much change.