Short-term Treasury yields surged over the last six days and recent breakouts suggest that the Fed will raise short-term rates in December. Yes, it sounds blasphemous, but the bond market tends to lead the Fed in these matters. In fact, I would suggest that the bond market is the closest thing we have to inside information, at least when it comes to the Fed. Just a month ago, the 5-year Treasury Yield ($FVX) was at its lowest level since January and the odds of a rate hike from the Fed seemed quite small. This has suddenly changed as the 5-year yield surged to its highest level since early August.
The next chart shows the 5-YR Treasury Yield ($FVX), the 10-YR Treasury Yield ($TNX) and the 30-YR Treasury Yield ($TYX) in the main window and the 3-month Treasury Yield ($IRX) in the indicator window. I am using these symbols because they are updated during the day. Note that 20 is the equivalent of 2%. Also note that I am using "price (same scale)" as an indicator overlay to place all three on the same scale. All four yields surged over the last seven days and this means money is moving out of the bond market. Wonder where it might go?
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--Arthur Hill CMT
Plan your Trade and Trade your Plan
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