Here is a long term view of long term US Gov't interest rates. Long term is defined as 30 years and is a common bond owned by pension funds and insurance companies and other long term investors with long term obligations.
I highlight the various ranges of interest rates as shown in these 4 boxes and the few moves that temporarily moved interest rates outside those boxes:
1. 1987 Stock Market Crash on collapsing USDollar, hiked capital gains taxes starting in 1988, trade wars with Germany, S&L crisis brewing from 1986 real estate tax law change, and Congressional moves to eliminate interest rate deductions on takeovers.
2. Orange County Bankruptcy
3. Great Financial Crisis "GFC" - massive deleveraging of the banking industry forcing asset prices down in a collapse.
4. Covid reaction by Gov't to shut economy down and stimulate spending and handouts to keep economy afloat
5. Current over-reaction to over-stimulation during lockdowns and supply chain issues.
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Yields right into the heart of the 9-year sideways (2003-2011's) range of interest rates, a massive consolidation area and very likely to be resisted at these levels. The level of interest rates has severely curtailed long term borrowing demand and reduced demand for cars, houses and even solar-panel systems. The overall economy is flat and running on fumes of demand. Time will tell. October 18, 2023 10:14AM EST 4.987 last TVC:TYX
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So far, the range and movement of TVC:TYX is right on track to what I had laid out here back in October of 2023 at a time when there was panic about rising interest rates. Expect more choppy sideways action from here to continue the guess.
@Superchip1979, Thanks. It does make sense that there are 'zones' of interest rates based on the assessment of the economy and the potential for regulatory and fiscal policies to push rates around.
Superchip1979
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@timwest, That gas trade last week was well spotted . I put it on a demo with some other trades , wish id been in it for real now , 👀🐱🏍
traderdmm
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Breaking such a long term trend usually has a significant move. My belief is that the fed will cut which is simply the overnight rate (1-day rate) lowering the front end while the back end of the curve continues to move up. Perhaps a steepening of the yield curve (2/10s) by positive 100 bps.
jwow5555
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so yields coming down soon?
timwest
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@jwow5555, I believe so. With bankruptcy filings way up, mortage originations way down along with home sales, money supply collapsed, and interest rate payments booming at the Federal level, it wont be long until the Fed realizes they have over-tightened and will begin easing up. Economic measures take time. The way I see it, pricing power short term doesn't mean inflation forever.
timwest
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@jwow5555, I am fighting the "trend" here for sure by pointing out the fundamental reasons why the Fed will cut, but they also want to constrain Federal spending by keeping pressure on rates. So it is a battle here. I think it is far enough based on fundamentals. October 18, 2023 10:28AM EST