Wednesday, April 23, 2014

Yield Curve Is Flattening

Above is a chart of the difference between the 30 and 5 year CMTs -- constantly maturing treasuries.  Since the beginning of December, this spread has been declining. 

The reason for the decrease is a rally in the long-end of the curve as the 30 year CMT has decreased from ~ 3.9 to ~3.5, or a decrease of about 40 basis points.  That tells us that traders don't see inflationary pressures.

Tuesday, April 22, 2014

Treasuries Are the Surprise Year to Date Winner

When the Fed announced an end to the quantitative easing program, the treasury market sold off.  The reason is simple: the largest buyer of treasuries had announced they were leaving the market.  However, since January 1, treasuries have outperformed the market as a whole.

When we compare long treasuries, SPYs, commodities (DBC) and the dollar (UUP) since January 1, treasuries again outperform.