The US 10 yr Constant Maturity Yield
Click to enlarge
Souce: Global Financial Data



The move in the 10 year yields has led to all sorts of speculation as to the underlying cause.

Since none of this is within our my control, all we can do is look at this from a longer term perspectives to put this into broader context .

Three takeaways:

1) Bond Yields can be driven to extreme son the upside and on the downside.
2) It takes many years or decades to unwind a move like that
3) Rates could go appreciably higher if the 30 year bond bull market is over.

Looking at yields from an historical perspective, there is still plenty of room for yields to rise if they simply “normalize.”

The chart below put the past 5 decades into sharp focus:


1980-2013 10 Year Yield Constant Maturity



Category: Fixed Income/Interest Rates

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “U.S. 10 Year Bond Yields in Perspective (1790-Present)”

  1. wtkasch says:

    This is purely an observation and an attempt at loosely correlating the effect of the rate drop to another factor–income inequality. I haven’t researched this, but figured it would be worth mentioning just as a thought. Is it possible that the increasing concentration of wealth at the upper levels would result in consistently falling rates over a time period of decades? My somewhat initial logic in thinking this is that the rates do seem to correlate quite well with the decline of wealth for the middle class (30 years or so). As the concentration of wealth increases and stock prices react to effects like recession, the movement of funds to “safe” treasuries would potentially increase over time if the total wealth increased at the higher levels, assuming that those who possess wealth at those levels prefer to invest in paper securities at the expense of other categories (business investment, for example). Thoughts?

    • Except for the, you know, other 180 years

      • Petey Wheatstraw says:

        I don’t know, BR — the 1945 – 1980 and 1980 – present look much different than the years prior to 1945. The end of WWI and Reaganomics seem to have marked sea changes in yield trends.

  2. spooz says:

    Interesting look at correlations of bond yields and equities:

  3. rd says:

    This chart is one of hte biggest indictments of economics as a profession. In 1790, the US was a bankrupt band of renegade states and was paying interest rates of about 5.5%. There was a steady decline of the interest rates as the US found its footing and by 1900, the US was a world power paying interest rates of about 3%.

    1900 was about the same time that economics emerged as a profession in university departments, think tanks, and governments instead of just being some individual thinkers (Smith, Malthus, Marx, Mill etc.).

    Since then, we have had wildly cycling interest rates, especially once the Fed created in 1913. In general, I view 10-year interest rates as a major indicator of overall confidence in the US government to be a safe haven. It appears that the more economists there are, the more the interest rate fluctuates over the decades. At this point in time, it appears that the economists have taken over much of the pricing of bonds with the massive QE interventions – it will be interesting to see how much interest volatility that gives us in the future – will the economists help us re-experience the early 80s?

  4. postman says:

    @ rd

    Post hoc ergo propter hoc? Why not attribute your correlation to the growth of interventionist policies rather than the number of economists, most of whom don’t even work in “macro.”

    • rd says:

      Who do you think promotes and runs the interventionist policies? The politicians who love to open the spigots generally just know how to borrow money (as they have for thousands of years), not do QE or other measures. That requires economists to “prove” that the system can be controlled and won’t run amuck. Unfortunately, there is always those pesky factors that don’t get factored into the models.

      • postman says:

        @ You have a common misconception that most economists work in macroeconomics. Very few do. Check out job vacancies for economists on the web to see what I mean. So your number of economists graduating metric is largely irrelevant. You also ignore the many market proponents–often villified by the left–who want rules rather than macro-tinkering (e.g. Milton Friedman, John Taylor). The political will to intervene in the economy and the hubris to think their brand of intervention will improve things is paramount here.

      • rd says:

        Where is the proof that the rules work any better than other forms of intervention? There is very little macro-exonomic theory that appears to have worked out in practice by either the right or the left over the past 50 years. The concept that slashing marginal tax rates increases employment and income appears to be one of the major busts.

        I understand that many economists work on the micro scale in industry and on small scale problems. Some of the most interesting work in this arena is the behavioral economics which is starting to show why there have been so many problems at the macro- and micro-economics scales.

  5. GeorgeBurnsWasRight says:

    All opinion, but I’d guess the general decline from 1790 to roughly 1900 is due to changes in our economic and financial systems.

    The increasing volatility since then I’d attribute to the creation of the Federal Reserve, charged with affecting our financial system using their ability to control the Fed funds rate and reserves as almost the only tools available to them. Having been given only a “hammer”, they’ve pounded our financial system at times out of the balance which was formerly only maintained by market forces.

  6. b_thunder says:

    Was there a 2% “inflation target” before the Fed or was there an expectation of level prices (aka reversion to the mean) over long periods of time? All other things being equal (and they are clearly NOT), higher inflation over last 100 years should cause yields to be higher.

  7. Angryman1 says:

    Underlying cause is accelerating US growth. Pure and simple. Flight from safety is a very good thing

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