10-Year and 30-Year Treasury Yields Screaming, Challenge 2013 Cycle-Highs

US Treasury building
US Treasury building

Didn't Fed Chairman Ben Bernanke's testimony on Wednesday morning intend to calm fears that the bond buying was going to come to a quick end, or even a quick tapering off of activity? Apparently the bond market did not get that memo, and this matters because most investors consider the bond market to be more rational and a better prediction indicator than the stock market.

Now we have seen that the 10-year U.S. Treasury Note has suddenly gone back up over 2.00%. In fact, the last move was up about basis points for a 2.01% yield. The 30-year Treasury Bond is also up about 7 basis points to 3.20%. Over the last month we have now seen 10-year rates rise 22 basis points and 30-year rates rise by 25 basis points.

If you go back before this move to see higher rates earlier in 2013, the last time that the 10-year Treasury Note was up over 2.00% was March 15 and that cycle high yield was 2.09%.

Now go back to the 30-year Long Bond yield at 3.20%. The move here is less dramatic but we are now challenging yield highs going back to March as well when it looked as though the Treasury Long Bond was going to break above 3.30%.

We also have seen two Fed presidents try to tone down some of the fears that bond buying would either end rapidly or that the tapering effect would come rapidly. Right now it seems as though the investing community is trying to brace for that day of less bond buying and perhaps even higher interest rates ahead of time.

As a reminder for Long Bond owners: a rapid rise of 100 basis points on the 30-year Treasury Bond will cause a loss of more than 15% in face value. In short, a 100 basis point rise wipes out roughly five years worth of annual coupon payments.

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