Oct 21, 2024
Treasury yields are higher this morning as they’ve been seemingly every day since the Federal Reserve cut rates in mid-September. At 4.15%, the yield on the 10-year US Treasury has risen to its highest level since late July, and since the close on 9/17, the day before the Fed’s 50 basis point (bps) cut, the 10-year’s yield has risen on 15 of the 23 trading days (65%). Wasn’t the rate cut supposed to lower rates?
Given the sharp increase in Treasury bond yields since the September rate cut, we were curious how the current increase stacks up to moves in the 10-year yield following prior rate cuts from the Fed. Going back to 1994 when the Federal Reserve first started to announce its policy decisions on the day of their meetings, there have been 35 rate cuts (scheduled and unscheduled). Below, we show the change in the 10-year yield in the 34 calendar days (equivalent to the number of days since the most recent cut) from the close on the day before each cut.
With the 10-year yield now up 51 bps since the close the day before September’s cut, the current period ranks as the third largest since 1994. The only two cuts that were followed by a larger increase in yields were in June 2003 (103.1 bps) and November 2001 (87.1 bps), and the next closest was in March 2001 when the 10-year yield increased 47.5 bps. For all 35 rate cuts since 1994, the median change in the 10-year yield was a decline of 3 bps, and the 10-year yield increased 15 times (43%).
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Oct 21, 2024
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“Unlike the mediocre, intrepid spirits seek victory over those things that seem impossible.” – Ferdinand Magellan
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Last week marked the sixth straight week of gains for the S&P 500, but the tone to kick off this week has been subdued. Pre-market equity futures have been lower all morning and picking up steam to the downside. European shares are down close to 1% with Germany leading the way as PPI fell 0.5% or more than twice the consensus forecast for a decline of 0.2%. Treasury yields and crude oil, which are also both higher, aren’t helping the sentiment backdrop for equities either.
The only economic report on the calendar this morning is Leading Indicators at 10 AM, but it will be a busy week of data in terms of both earnings and economic reports.
Gold is trading up nearly 1% this morning and on pace for its fifth straight daily gain and fourth record closing high in a row. It’s been an amazing year for gold, and one example of that strength is that this current streak of record-closing highs is the longest since a six-day streak at the end of…late September.
If today’s gains hold, it would be the 43rd time this year that the stock closed at a record high. As shown in the chart below, that would rank as the second most record closing highs for a calendar year, trailing only the 57 record closing highs in 1979. With 49 trading days left in the year, that record in 1979 may not necessarily be destined, but it’s certainly within reach.
Along with the surging price of gold, gold miner stocks have been on a nice run this year. While gold is up just under 33% for the year, the S&P 1500 Gold Industry index has rallied even more with a gain of 37.3%.
Logically, it would make sense that gold stocks have been rallying by similar amounts as the commodity, but that has hardly been the case over the long term. Since the start of 1995, the S&P 1500 Gol Industry has rallied 57.1%, but gold is up more than ten times that at 615.3%!
Oct 18, 2024
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