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Hikes Keep On Slippin', Slippin', Slipin' Into the Future; Treasury Yields Sink Again

Treasury Yields Drop Again

Curve Watcher's Anonymous notes a further plunge in yields today following the disastrous payroll and factory order reports.

Yield on the 30-year long bond fell to 2.80% from 2.85% yesterday. Yield on the 10-year note once again sports a 1-handle at 1.97%, down from 2.03%.

Duration Current
Yield
Yield
Month Ago
Yield
Year Ago
Yield vs
Month Ago
Yield vs.
Year Ago
3-Month -0.01 0.02 0.02 -0.03 -0.03
6-Month 0.05 0.26 0.05 -0.21 0.00
1-Year 0.22 0.35 0.10 -0.13 0.12
2-Year 0.57 0.73 0.27 -0.16 0.30
5-Year 1.27 1.55 1.73 -0.28 -0.46
10-Year 1.97 2.18 2.42 -0.21 -0.45
30-Year 2.80 2.99 3.18 -0.19 -0.38


Treasury Yields vs. Month and Year Ago

Yield Curve versus Month and Year Ago

Data plotted from Bloomberg US Treasury Yields.


Rate Hike Odds

Curve Watcher's Anonymous also has an eye on rate hike odds. Here is a chart I put together on the evolution of rate hike odds. I captured two previous data points. Today I added October 2.

Evolution of rate Hike Odds

Data for the above from CME FedWatch.

FOMC Meeting Date Rate Hike
Odds on Oct 2
Rate Hike
Odds on Sep 22
Rate Hike
Odds on Sep 21
28-Oct-15 6.90 11.50 13.80
16-Dec-15 28.50 35.50 43.80
27-Jan-16 38.80 44.70 54.60
16-Mar-16 50.60 59.70 66.90

The above table is a bit simplified because there is a chance of hikes bigger or smaller than a quarter point. However, I believe it is safe to discount multiple hikes until we at least see the first one.

And following today's disastrous data reports, I think it is safe to rule out hikes this year. In honor of that statement and with a tip of the hat to my friend "BC" who suggested the song, I present this musical tribute.


Slippin', Slippin', Slipin' Into the Future

Link if video does not play: Time Keeps On Slipping Into The Future by Steve Miller Band.


Today's Reports

I don't believe the Fed will hike into this weakness and nor does the market. Rate hike odds have been pushed all the way out to March of 2016 (and even then just barely above 50%).

In addition, the flattening of the yield curve is outright recessionary.

 

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