Is The Treasury Market Sending An Ominous Message?

For anyone who’s involved in an industry sensitive to the level of interest rates, any move up in yields can spell a major problem for business!

Of course the mortgage industry comes immediately to mind and, by extension, real estate and by even further extension title insurance, etc.

But what about peoples retirement funds, college funds and other investments that would be hurt by higher yields likely resulting in some magnitude of stock market correction?

And then of course there are the bond fund investors whose balances would be severely impacted by a further spike-up in interest rates (bond prices move inversely to yields)?

On a more positive-side, potentially helped might be current retirees on fixed incomes or others with money in cash or cash equivalents who at some point in the future could invest in bonds at higher yields.

The Federal Reserve

Conventional wisdom says that the Federal Reserve only impacts short-term interest rates through the Fed Funds rate by using a variety of monetary policy initiatives (quantitative easing comes to mind) and that longer rates will fluctuate based on a different factors, not the least being inflation or the expectation of inflation.

In essence the Feds mandate is stabilizing prices and promotion of output and employment. In other words a strong economy but not so strong that rising inflation becomes an issue.

All of that said the following charts look at what I would call a disturbing uptick in medium to longterm rates and a stock market at the precipice of either a breakout move higher or one in the opposite direction.

So ultimately does this mean that interest rates are going to spike, the stock market tank and the real estate market grind to a standstill?

I, along with the majority of others, certainly hope not!

But the charts below are interesting to be aware of none-the-less.

One-Year S&P 500 Poised To Breakout or Break Lower! (Google charts)

High: 2117.39 March 2, 2015

Screen Shot 2015-05-12 at 1.52.02 PM Screen Shot 2015-05-12 at 1.52.32 PM

One-Year 10-Year Treasury Chart (CNBC)

Low Yield: 1.68% January 26, 2015

Screen Shot 2015-05-12 at 1.52.51 PM

One-Year 30-Year Treasury Chart (CNBC)

Low Yield: 2.25% on January 30, 2015

Screen Shot 2015-05-12 at 1.55.13 PM

One-Year Fed Funds Rate Chart Including Target Rate (NY Fed)

Target Rate: 0.00% – 0.25%

Screen Shot 2015-05-12 at 2.00.35 PM

________________________________________________________________

Michael Haltman, President of Hallmark Abstract Service, New York.

HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.

And, for anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider you always have the right to choose your own (click here to learn more)!

If you have any questions you can reach Michael by email at mhaltman@hallmarkabstractllc.com.

Leave a Reply

Your email address will not be published. Required fields are marked *