Well sort of.
From Bloomberg:
The central bank’s projected neutral interest rate is 2.5%, and it’s probably not going up soon.
Last week was something of a watershed moment in the $21 trillion U.S. Treasury market. After a period of relentless selling that pushed longer-term yields to their highest levels in a year, Federal Reserve Chair Jerome Powell had one last opportunity to quell investors’ nerves before the central bank’s self-imposed blackout period.
Instead, he said that he’s not too bothered by the moves and that traders are on their own. Mic drop.
This kind of attitude naturally raises the question of just how high longer-term Treasury yields can go from here, given expectations for one of the biggest years of U.S. economic growth in decades. The benchmark 10-year yield is already up 66 basis points since the start of the year, on pace for the fourth-steepest quarterly climb since the 2008 financial crisis. Could it soon reach 2%, or 2.5%, or even 3%?
As I’ve noted before, the Fed only has direct control over shorter-term rates while longer-term yields are more prone to move based on market expectations for economic growth and inflation. But that’s not to say the central bank has no say at all over the long end of the yield curve. Its “dot plot,” which shows policy makers’ projections for the fed funds rate, includes median estimates for not just the next few years but also the “longer term.” Currently at 2.5%, this is the “neutral rate” at which monetary policy is neither accommodative nor restrictive and keeps the economy at maximum employment with inflation around 2%. In the first dot plot in 2012, the median longer-term rate was 4.25%.
Almost without fail, the Fed’s longer-term dot has served as a soft cap on longer-term Treasury yields. While it’s certainly possible that this economic recovery will be different from the last one because of supportive fiscal policy and the central bank’s new monetary-policy framework, for now it should be considered a guidepost for bond traders about just how far the selling can go.....
....MUCH MORE
Where this gets especially interesting is when it is combined with a post from RealInvestmentAdvice, March 7:
Eric Hickman: A Signal To Buy 30-Year BondsEric Hickman discusses the recent signal to buy 30-year bonds.
A technical indicator with a reliable history is signaling that 30-year Treasury yields will soon decline.
A relative strength index (RSI) can be measured for any price series and represents how much and frequency gains are occurring versus losses. The index is used as a contrary or turning-point indicator. After periods of strong, persistent selling, buying is expected and vice versa.
It isn’t a complicated calculation. The RSI takes the average price change of days with gains compared to the average price change of days with losses over the last x days. This is converted into an oscillator that can take any position between 0 and 100. When prices (or yields) are rising fast and persistently, the oscillator will approach 100; when selling occurs with lower prices, it will approach 0. The oscillator spends most of its time in the middle, say between 30 and 70. Extreme readings (close to 0 or 100) happen rarely. We can study these extremes historically to see how useful the index is at identifying major turning points in markets.
The RSI On The 30-year U.S. Treasury Yield
For this analysis, I looked at the RSI on 30-year U.S. Treasury yields measured with a 14-day average (the x in the description above). This is the longest and most conservative daily average generally used. I looked at historical times where the RSI equaled or was greater than it was at the close of Wednesday, 2/24/2021, at 78.
A reading of 78 (or more) is rare, happening in just seven periods going back to 2000, about once every three years. You can see them in the chart below. Focus on the high extremes that rise to or above the blue threshold line of 78.
We can translate these points to the 30-year U.S. Treasury yield. Look where the blue vertical lines (RSI over 78) intersect the gray line (30-year UST yields). The blue arrows show that yields fell (prices rose) after these buy signals, suggesting a buy signal now....
*****
.... A Good Signal To Buy 30-Year Bonds.
The table below summarizes the answers to those questions. The signal triggered between 0 and 35 days before and between 0 and 33 basis points (0.33%) below the peak in yields. This averages 14 days before and 12 basis points below the peak, which suggests a yield peak on 03/10/2021 at 2.36%. This is much too specific a prediction for markets, but it gives an idea of where we might be in this 30-year yield backup.
It looks to be about over.....
....MORE, charts
Today's upmove in the 30-year is the first real sign of seller exhaustion we've seen in ages (or at least three months):
