Saturday, November 9, 2013

Yields Are Rising and it's Relentless

My expectation is that that QE will be increased in Q1 of 2014. She, like most of the FOMC members, believes that they can control long-term interest rates with QE, and that low rates help the economy. So even though it is clear that neither of these objectives are being achieved, I expect that she will try to keep the yield on the 10-Year Note below 3% with even greater amounts of Treasury paper being gobbled up with massive Fed buying.
The really important thing is that the yield on the 10-Year Treasury Note is inching back up. The yield dropped slightly after last week’s FOMC announcement, but that respite was short-lived. Yields have been in an uptrend since May, and this trend is likely to continue. 

It is interesting to note that yields are following the same pattern that started with the May FOMC meeting. Despite all the bond buying by the Fed which should create demand and therefore lower yields, the opposite is happening. Yields are rising, and it is relentless. It is happening slowly, but surely, like a powerful locomotive chugging away, which I think is a good way to describe what is taking place.

- James Turk via a recent King World News interview: