The gap between the 10-year Treasury yield and the federal funds rate has narrowed sharply in the last year but remains a long way (~110 basis points) from inverting.
Last October our VLT algorithm recorded a bond BUY signal—one that we said, at the time, conflicted with our outlook.
We somehow missed this signal in January, perhaps because we were pre-occupied with so many other signs of “climate change.”
At the risk of yelling “fire” in a crowded theater, we present a few parallels between recent action and the year leading up to the October 1987 crash.
While there are many parallels between recent action and that of 1999-2000, stock market leadership is not one of them.
Bond investors residing in the Lower For Longer© camp no doubt feel vindicated by the summer rally that’s taken yields on 10-year Treasury bonds to as low as 2.06% in early September.
We continue to like “safe spreads” and remain favorable on these bonds.