10-year yields

10-Year Yields May Never See 8% In Our Generation Again

We touched on yields a few weeks back but never finished our discussion. A generation has grown up thinking and believing that yields have to rise because rates today are too low. Well, what if they aren’t too low, but they are just back within a normal range on the long end of the curve? Is it possible?

UK Consol

This is one of my favorite charts, UK Consol, showing interest rates going back to the year 1703! Which period looks out of whack here?

UK Consoles historical yields

 

If you said the mid-1970’s to mid-1980’s, you are correct.  It is surprising that from 1703 until say 1960, yields on the console broke 5 percent three times!  Notice how 2016, the very last datapoint is not that far off previous levels throughout time.

10-Year Treasury Rates

Then, of course, we can move to the present and our 10-year treasury rates.

10-year treasury rates, yield

 

 

Lower Yields

Despite the recent move higher in yields, they are a long way from having a meaningful breakout higher. In fact, it is likely we see yields move lower in the short-term testing our red trend-line, before any move higher again. The two black lines represent a very long-term channel that will likely not easily be broken. Meaning that overall yields are likely to continue to move lower before they move higher in the long run.

Just something to consider and think about.

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