Treasury yields have soared following the surprising election of Donald Trump as President of the United States. Theories abound regarding the causes and consequences of the move, but as always it is good practice to step back and take a look at the big picture.
Veteran technical analyst Louise Yamada, in a CNBC interview, looked at interest rates in the U.S. over the last 200 years and draws our attention to a few points. First, according to Ms. Yamada, is that interest rates are most likely to only go up from here. Yamada refers to an apparent “bottoming formation” that has been forming over the last several years.
On the 10-year Treasury note, a move above 3% would confirm her assessment because that’s the “level at which we can definitively say that rates have reversed”, Yamada states. Yamada predicts that higher rates will boost equity prices in the near term, as in past cycles. However, she will be watching the roughly 5% level where “you’ll start having problems.” 10-year Treasury notes finished this past week at 2.34%, so we’re a long way away from her “danger zone”.
