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
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.
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
- Payroll Disaster: Establishment Survey +142K Jobs, Employment -236K; Labor Force -350K; 59K Downward Revisions
- Factory Orders Disaster: Factory Orders Hit the Skids, Last Month Revised Lower, Shipments Down 4th Time in 5 Months
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.
Mike "Mish" Shedlock
