Don't Ignore This Chart!

10-yr Yields, the Hockey Stick and the Dollar


The Dollar Index has been on a tear the last four months as the spread between the 10-YR Treasury Yield ($UST10Y) and German 10-YR Bund Yield ($DET10Y) widened to historic levels. The chart below shows 10-yr yields for four countries in the top window. US and UK yields are by far the highest. The German 10-yr Yield moved below the Japanese 10-yr Yield in February-March and the German yield is the lowest. 

Click this image for a live chart

The middle window shows the ratio of the US 10-yr Yield and the German 10-yr Yield. This ratio is above 10 and this means 10-yr US Treasuries yield more than ten times German 10-year Treasuries. Notice how this ratio moved sharply higher the last four months and this move coincided with a sharp rise in the Dollar. The bottom window shows the Dollar Index ($USD) surging from 80 to 99.75 in eight months (+25%). With the Euro accounting for 57% of the Dollar Index, the Dollar is likely to continue its advance as long as the spread between US 10-yr Yields and German 10-yr Yields continues to widen. 

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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