Don't often pay attention to his stuff, but thought this an
interesting observation FWIW so here goes:
"So for 10-year Treasuries, a multiple of influences obscure a
rational conclusion that yields must inevitably move higher during
Trump's first year in office. When the fundamentals are confusing,
however, technical indicators may come to the rescue and it's there
where a super three decade downward sloping trend line for 10-year
yields could be critical. Shown in the chart below, it's obvious to
most observers that 10-year yields have been moving downward since
their secular peak in the early 1980s, and at a rather linear
rate. 30 basis point declines on average for the past
30 years have lowered the 10-year from 10% in 1987 to the current
2.40%.
Source: Bloomberg.
Now, however this super strong, frequently tested downward trend
line is at risk of being broken. 2.55% to 2.60% is the current
"top" of this trend line, and over the past few weeks it has held
and reversed lower by 15 basis points or so. BUT----------. And
this is my only forecast for the 10-year in 2017. If 2.60% is
broken on the upside – if yields move higher than 2.60% – a secular
bear bond market has begun. Watch the 2.6% level. Much more
important than Dow 20,000. Much more important than $60-a-barrel
oil. Much more important that the Dollar/Euro parity at 1.00. It is
the key to interest rate levels and perhaps stock price levels in
2017."
Does he ever mention the correlation between YoY GPD and the 10
year? Quarterly GDP rate of change sets the conditions for YoY GDP
to crack 3% and head towards 4% this year. If that comes to pass,
3% on the 10 year is highly probable.
Excerpt from Bill Gross Letter
Posted by bearcat4 on 3rd of Feb 2017 at 07:51 pm
Don't often pay attention to his stuff, but thought this an interesting observation FWIW so here goes:
"So for 10-year Treasuries, a multiple of influences obscure a rational conclusion that yields must inevitably move higher during Trump's first year in office. When the fundamentals are confusing, however, technical indicators may come to the rescue and it's there where a super three decade downward sloping trend line for 10-year yields could be critical. Shown in the chart below, it's obvious to most observers that 10-year yields have been moving downward since their secular peak in the early 1980s, and at a rather linear rate. 30 basis point declines on average for the past 30 years have lowered the 10-year from 10% in 1987 to the current 2.40%.
Source: Bloomberg.
Now, however this super strong, frequently tested downward trend line is at risk of being broken. 2.55% to 2.60% is the current "top" of this trend line, and over the past few weeks it has held and reversed lower by 15 basis points or so. BUT----------. And this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017."
Does he ever mention the
Posted by a_l_ on 4th of Feb 2017 at 02:18 pm
Does he ever mention the correlation between YoY GPD and the 10 year? Quarterly GDP rate of change sets the conditions for YoY GDP to crack 3% and head towards 4% this year. If that comes to pass, 3% on the 10 year is highly probable.
I saw nothing like that
Posted by bearcat4 on 4th of Feb 2017 at 05:11 pm
I saw nothing like that in his letter. I was completely unaware that such a relationship existed.