We take a brief look at two interesting Treasury Yield curves today.
The first Yield Curve takes a snapshot view of the yield curves at the end of Q1 2011 and Q1 2012.
What is very noticeable is the fact that the overall yields for the end of Q1 2012 is significantly lower than a year ago. Taking a look at the at the 5 year T-Note yields as an example, the spread between the end of March 2011 (5Yr T-Notes at 2.24% ) and the end of March 2012 (5Yr T-Notes at 1.04%) was 1.20% down. The question is what factors drove down the ‘risk-free’ rate on US Treasuries?
However, turning our attention to the second graph below, indicates a slightly different perspective; and hence the title of this post. Has and is risk returning to the capital and stock markets to levels we previously experienced?
Not quite, is the short answer, because the spread between 31 December 2011 (0.83%) versus the 1.04% rate at the end of March 2012, only indicates an uptick of 21 basis points in the yield rate. The significance is not the percentage spread, but rather the direction of movement and we will continue our analysis at the end of Q2 2012 to establish whether the direction in Q1 2012 will be maintained into Q2 and beyond.
The final question to ponder is this:
Are we finally seeing the corner turned, or are there still significant risks in the global economy and sovereign debt markets to cause a few further after shocks in the months to come?
- Where will all the new money come from? (themarketsoul.com)
- The BIG Sovereign Debt Structure cliff – Part 1 (themarketsoul.com)
- The Fed’s Undistinguished Macro Discussions Circa Jan 2006 (wallstreetpit.com)
- The Real Yield Curve and a Double-Dip Recession (yelnick.typepad.com)
- Pricing of liquidity (jrvarma.wordpress.com)
- Rates are rising! Oh wait, scratch that. (theglobeandmail.com)
- Treasurys bounce back as European debt falters (sfgate.com)
- Analysts see more gradual rise in U.S. Treasury yields (theglobeandmail.com)
- Is the bond market tightening for the Fed? (superbullinvestor.com)
- Surging U.S. Treasury yields set to take a breather (theglobeandmail.com)