Nicholas Santiago | Sep 12, 2013 12:50PM ET
Last week, yields on the 10-year U.S. Treasury Note reached the 2.98 percent level. As we all know, yields have soared higher by 137 basis points since April 2013, when the yield on the 10-year U.S. Treasury Note was as low as 1.61 percent. The recent surge in bond yields has certainly caused stock corrections in the home-builders, mortgage/real estate REITs and the highly leveraged utility sectors. The Federal Reserve is buying $85 billion dollars a month worth of U.S. Treasuries and mortgage backed securities (MBS) at this time. So far, the case can be made that yields are artificially being held down.
How Much Can It Fall?
Now that everyone knows a Federal Reserve tapering of its current QE-3 program (central bank bond buying) is coming, how much can bond yields on the 10-year U.S. Treasury Note actually fall? Currently, the daily chart of the 10-year U.S. bond yield (TNX) is showing very good support around the 2.63 percent level. There is also more chart support around the 2.45 percent level. So either way, bond yields are not going to decline all that much unless there a major economic disaster takes place. The odds of an economic disaster occurring in 2013 is very unlikely, however 2014 is another story.
Higher Bond Yields Are Telling Us Two Things
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