Thursday, August 25, 2011

How yields track nominal GDP changes

Yes, we know what happened today: gold down, dollar up, 10-year Treasury yields climbed to 2.30 per cent.
We heard. Jeeeeest a bit less room for Bernanke to let us down on Friday.
But if you think treasury yields are about to make a sustained, meaningful move upwards, you might want to look at this first:

And a few thoughts to go with it from Moody’s Analytics
Previous economic recoveries produced faster growth than will likely be seen anytime soon, and rates reflected these higher rates of output and inflation. In the 1990s expansion nominal growth averaged 5.7% as the 10 year Treasury yield averaged 6.3%. In the 2001-2007 upturn, growth averaged 5.2% as the 10 year Treasury averaged 4.4%. Growth currently stands at 3.7% with a 2.1% Treasury yield. Below trend growth naturally lowers rates, while robust international demand for dollar assets and aggressive monetary policy drive yields down further.

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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.