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Treasury Yields

04/14/2010

First, let me once again state what I told the students at the University of Connecticut School of Business back in early February -  the best trade out there is to take a thirty year mortgage. I still believe that; it is a generational opportunity. Let me also tease my quarterly commentary, where I suggest that the most important factor when talking about a 10 year treasury yield rise above 4% is SUSTAINABILITY.

Source: Bloomberg

Let's not get too excited that the 10 year traded at 4.0095 on April 5.  Rather, let's understand that it quickly retreated below 3.90% - that's what is important.

We are about to enter a period where the rapid recovery in economic data begins to moderate. I expect housing to downtick; I expect the continued limited credit availability to halt the consumer spending recovery. I am not getting bearish about the market, just realistic about economic data.

Therefore, until "final demand" really begins to improve, only a SUSTAINED BREAK ABOVE 4% will get me excited about rising treasury yields.

 

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