Treasury Bond Yields Following Perfectly the Reduction of QE with New 1-Year LowsJuly 17, 2014
Last weekend we wrote that The Flow of QE Suggests Lower Bond Yields and Stock Prices and it appears that is just what we are getting. Putting the stock part aside for now, we simply would like to point out that long-dated US government bonds are following the reduction in QE nearly perfectly so far. Today’s decline in yields certainly helps keep this model intact as we note that 30-year and 10-year yields are now down by 8bps in after hours trading. Whether today’s move in yields was a flight to safety on geopolitical grounds or simply a reflection of slower growth expectations is questionable, but the correlation with our model of the projected flow of Fed asset purchases is uncanny.
Also of note is that both the 30-year and 10-year treasury bonds made new 1-year lows today.