The yields on the 10-year note ended May 5, 2023 at 3.44%, the 2-year note ended at 3.92%, and the 30-year at 3.76%.
Here is a table showing the yields’ highs and lows and the FFR since 2007.
The charts below shows the daily performance of several Treasury bonds since the pre-recession days of equity market peaks in 2007.
The next chart is an overlay of all 6 charts above along with the Fed funds rate (FFR) since 2007.
A long-term look at the 10-year yield
A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 oil embargo that triggered the era of “stagflation” (economic stagnation with inflation).
Here’s the latest 10-2 spread. Typically, the spread goes negative for a period and then out of the red prior to recessions. The lead time for recessions is quite a range – after going negative, recessions have begun anywhere from 16 to 62 weeks later. We also can see a false positive in 1998 where the spread went negative for a short period. In the last recession, the spread went negative a couple of different times before rising.
If we use the first negative spread date as our starting point, the average number of weeks leading up to a recession is 37, or about nine months. If we use the last positive spread date after being negative before a recession, the average is 17 weeks, or 4.25 months and the median is 14 weeks, or 3.5 months.
The 30-year fixed-rate mortgage
The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 6.39%. Here is a long look back, courtesy of a FRED graph, of the 30-year fixed-rate mortgage average, which began in April of 1971.
Now let’s see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see our latest Treasury Yields in Perspective update.
Note: We’ve updated this commentary with data through the May 5th market close.
Originally published by Advisor Perspectives on May 5, 2023.
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