Banking, finance, and taxes

Longer Treasury Yields Reaching Critical Juncture

The yield on the 30-Year Treasury Bond is now over 4.60% and the 10-Year Treasury Note is yielding 3.75%.  It was just at the last bond auction that the T-Bond was 4.49% and sold at 4.52%, and the 10-Year’s yield…

By Douglas A. McIntyre
Published December 22, 2009, 12:51pm ET · 2 min read

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The yield on the 30-Year Treasury Bond is now over 4.60% and the 10-Year Treasury Note is yielding 3.75%.  It was just at the last bond auction that the T-Bond was 4.49% and sold at 4.52%, and the 10-Year’s yield was a mere 3.20% on November’s closing yield.  Most traders will look at the prices of the on-the-run bond futures rather than an outright yield, but that inverse relationship between price and yield is always present.  These rising yields might not be a major concern on the surface and when considering we are in the holiday trading with lower market participation, but these yields look like they are bumping against the highest yields in July and August.  Much more weakness in price will have these yields at a critical juncture and where rates will be headed in 2010.

I have recently noted, “If (ergo when) Long Bond rates are closer to 5% next year after the FOMC finally starts raising short-term rates in a game of catch up…..” Unfortunately, this looks like it may be closer to becoming an issue sooner rather than later.

Historically you see at least some retail demand for Treasury notes and bonds at each incremental higher percentage point.  Many market pundits have called longer-dated bond prices the next bubble that will burst.  If that occurs, then it won’t just be the 4.00% yield for the 10-Year Treasury and 5.00% yield for the 30-Year Treasury that will be debated.  The debate will be if these Treasury bond and note yields should be trading around 6.00% and 5.00% respectively.

JON C. OGG
DECEMBER 22, 2009

Contact [email protected] for any questions or corrections.

Douglas A. McIntyre

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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