Monthly Average Yields: 2, 5, 10, 20 and 30

Yields as 2, 5, 10 and 30 year monthly averages trade below 5 year month averages as follows: 1.3025, 1.5744, 1.9150 and the 30 year at 2.4335.


The 20 year yield from current 1.9350 trades below the 30 year at 1.904. While the shape of the yield curve correctly points straight up from 2 to the 10 year, the long end contains problems at the 30 year and 20 against a downslope curve. The short end of a yield curve from 2 to 10 year is reserved for trading interest rates, money market funds, stocks indices, currencies and market instruments, the long end is a commentary to overall economics and health of an economy.


2 Year Yield


The 2 year yield from current 0.748 trades between the 2 and 3 year monthly averages from 0.3376 to 0.8871 or 54 points and a mid point at 0.6123. Above 0.8871 targets the range from 0.8871 to 1.2865, a 39 point range and mid point at 1.0868. Below 0.8871 targets a 10 point range from 0.3376 to 0.2357.


Monthly averages for the 2 year are uniform and ends at the 1.3025 5 year average. Targets are located from 0.2567, 0.3778, 0.3785 and 0.7194.


Fed Funds Rate vs 2 Year Yield


Monthly averages for the Fed Funds rate trades at the 1 year monthly at 0.0816 to 0.2291 then 0.8725 at the 3 year monthly average. Fed Funds monthly averages from the 6 year to the 15 year trade from 0.9743 highs to 0.54 lows and much in between. Neither the 2 year yield nor Fed funds are oversold nor overbought as both exist in trade ranges.


5 Year Yield


The 5 year yield from current 1.245 trades a 40 point range between the 3 and 4 year monthly averages from 1.0870 to 1.4927 and a mid point at 1.2898. Below 1.0870 targets 0.8146 and above 1.4927 targets an 8 point range from 1.4927 to the 5 year monthly average at 1.5744.


10 Year Yield


The 10 year yield trades a 35 point range between the 3 and 4 year monthly averages from 1.4564 to 1.8095. As written in September, the 10 year at 1.57 traded a 38 point range from 1.2290 to 1.6146.


The 5 year monthly average in September was located at 1.9321 and 1.9150 today. While the topside at the 5 year dropped, bottom averages rose. In October from 1.51, a break at 1.6146 targeted a 25 point range from 1.6146 to 1.8696. Lower targeted 1.6146 to 1.2290. Topside averages dropped significantly in 2 months while bottom side averages rose to lead to an eventual showdown.


Below 1.4564, the 10 year range trades a 5 point parameter from 1.4564 to 1.4045 then a significant drop to the next average at 1.1545. Above 1.4564 then the range becomes 1.4564 to 1.8095 and a mid point at 1.6329.


10 vs 2 Spread, Fed Funds and Correlations


From the 10 year mid point at 1.6329 to the 2 year from 0.6123 then the 10 and 2 spreads 1.1226 and 0.89 from averages 1.4564 and 0.3376.


The 10 year vs 2 at the 2 year monthly average correlates +48% and +86% at the 3 year average.
Fed Funds at the 1 year monthly averages vs the 2 year correlates +0.01%, the 2 year average at +86 and +97% for the 3 year.


The corresponding 10 year vs Fed Fund at the 1 year average correlates -71%, +39 at the 2 year and +81% at the 3 year average.


20 Year Yield


Best monthly averages are located from 1.7080 to 1.9451.


30 Year Yield and 10 Year Correlations


From current 1.905, the 30 year yield trades from the 2 year monthly average at 1.7987 to the 1 year average at 2.0261 then the 3 year at 2.0581 and 2.3126.


While the 30 and 10 year monthly averages correlate at the 1, 2 and 3 year at +83%, +96% and +98%, the 30 year should trade a minimum of 2.05 and a range from 2.05 to 2.52 at the top end. Problem to 2.52 along the price path is the 4 year at 2.3126 and 5 year at 2.4335.


Fed Funds vs the 30 year correlates -73% at the 1 year, +30% at the 2 year and +77% at the 3 year. While the 30 year offers no assistance to Fed Funds insights, the 30 also offers no help to trade financial instruments.

Brian Twomey

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