Yield across the board right now is in the 4s except for one and two month money. The one year is the leader, roughly in the middle of the pack, around which the other rates have been organizing.
Interestingly enough, compound annual growth of nominal GDP since the year 2000 22 years ago has come in at 4.18% through 2Q on 2Q. The 30-yr tonight is yielding 4.19%. This looks like rate normalization to me because rates are compressing in that vicinity, finally commensurate with actual economic growth, after the pitiful all-time-low average annual 30-yr yield in 2020 at 1.56%. We haven't had a 4% average 30-yr yield since 2010.
Given the extraordinary interventions by the US Federal Reserve over the period to suppress interest rates, we may see them explode the other way given the length and depth of the distortions. Trillions upon trillions of US Dollar denominated debt was sold at those repressed prices. In 2020 alone we're talking about $2.9 trillion in 2-10yr Treasury notes, not counting the short end bills and the long end bonds, all yielding well under 1%. It could get really ugly.
Recession doesn't always happen right away, but the signal is pretty clear. It seemed to take forever in the late 1990s.
As always, click images to enlarge.
Recessions are in gray.
And as always, this is not investment advice.
 |
| daily view through 10/25/22 |
 |
| monthly view through Sep 2022 |
