2 Percent 10 Year Treasury Yield Gets Tested
It has been a crazy week, to say the least. Investors have been tested in ways not seen since last August. Crude Oil plummeted to new lows, and scared money fled the stock market to the safety of US Treasuries as yields fell.
Last week, I shared why the stock market would likely be following the yield on the 10 Year Treasury as banks reported earnings. This was because the US 10 Year Treasury Yield serves as the benchmark for many consumer and business bank products, including mortgage rates.
The 2 percent 10 Year Treasury Yield level is a key psychological level. It had held since August, but was broken on Wednesday and Thursday (near market lows). Today it is back above 2 percent amidst a relief rally in the stock market and Crude Oil.
The million dollar question is: Will the 2 percent level hold?
China
By now, we have all read a number of articles attempting to quantify the effect that the financial crisis in China (the world’s second largest economy) will have on the US.
There are a number of good reads on Industries most likely to suffer from the slowdown. However, an opinion piece from the Wall Street Journal back in early July summed up US banks exposure to counterparties in China pretty well. Six months later, this may be the question that the financial markets need answered.
How Well Have We Learned the Lesson of the Financial Crisis?
That’s a great question. Have we learned from 2008-2009? As the market tumbles, many people will question whether investors, the Fed, and the banks have learned the lesson from our own Financial Crisis. How vulnerable is our “financial plumbing” to the disruptions in the rest of the world, namely China? Next we us ask, how soon will it be before the crack in the plumbing leaks into the real economy.
The 2 percent 10 Year Treasury Yield level is the line in the sand. That should tell the tale in 2016. Stay tuned.
10 Year US Treasury Yield Chart by CNBC.com.
Twitter: @rinehartmaria
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
