30-Year Yield Hits All-Time Low

This is going to be a busy week for the stock market. Of course, earnings season is starting to heat up, and analysts have been slashing their forecasts in a serious way. For the rest of this year, we’re probably looking at growth of 3% to 5%. On our Buy List, eBay reports tomorrow and Signature Bank follows on Thursday.

The Federal Reserve meets again next week and I’ll be curious to hear if there’s any change in direction. To put it bluntly, the strong dollar has already done a lot of the Fed’s tightening work for them. Last week’s inflation report showed that prices are falling. It’s hard to argue for higher rates when you have deflation. On top of that, the latest industrial production report was pretty weak.

Last night, Jon Hilsenrath of the Wall Street Journal had an article saying that the Fed is on track for a rate hike later this year. I’m not so sure but it’s strongly assumed on Wall Street that Hilsenrath is the unofficial mouthpiece for the Fed.

The latest from the futures market shows that investors are beginning to think a rate hike won’t happen this year. The futures market sees rates reaching 0.41% by the end of this year. The Fed sees short-term interest rates hitting 2.5% by the end of 2016. But the futures market says it’ll be 1.1%. Personally, I side with the futures. The five-year forward inflation expectations rate is now below 2%. Last week, the yield on the 30-year Treasury got down to 2.35%. That’s the lowest since the Treasury started issuing those bonds regularly in 1977.

Stock markets in Europe are edging to their highest level in years on anticipation of the ECB’s big announcement on Thursday. Draghi is set to start buying some bonds. We’re going to find out the details this week. My fear is that the market is setting itself up for a disappointment if the number’s not large enough.

Here’s the 30-year Treasury yield:

Here’s the Five-Year Forward Inflation Expectation Rate:

Posted by on January 20th, 2015 at 10:39 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.