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June 1, 2012

10-year Note Objective of 1.47% Reached. What’s Next?

June 1, 2012

10-year Note Objective of 1.47% Reached. What’s Next?

For months Jim Grauer and I have been preaching that 10-year note would have a technical objective of a 1.47% yield. Today it was reached.

The question now is, “How long are Treasury yields going to stay this low?”

While yields will move up and down constantly I believe that we will see yields near here for another year.

Why? Chaos in the EU and very weak economic growth in the U.S. 1Q2012 GDP was revised down to +1.88%. GDP growth has been under 3% for 7 consecutive quarters and averaged under 1.9% for those seven quarters. The recovery from the recession has been stalled for almost two years and is, in fact, even worse because BEA continues to overestimate GDP growth, It does this by underestimation inflation. It used an annualized inflation rate during 1Q-2012 of 1.65% when CPI-U (unadjusted, from BLS) was +2.3% from April 2011 to April 2012. Per Rick Davis of Consumer Metrics Institute, if we used the accurate seasonally adjusted CPI-U instead of BEA’s 1.65% we would conclude that 1stQ2012 GDP fell 0.13% annualized.

The economy is in much worse shape than presented in the media.

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