Get started

TYX

XAUUSD: What's it worth? The correlation to real yieldsThis chart compares the real yield of long term Treasuries (top) to gold in USD (bottom). The real yield is the investor in long term Tresuries expects to receive after allowing for inflation (nominal interest rate minus the inflation rate). At a glance there's visibly a strong negative correlation betweeen real rates and the price of gold over time. Research by _Erb and Harvey showed a negative 82% correlation between real interest rates and gold prices from 1997 to 2012 (The Golden Dilemma). The real yield on long term treasuries has fallen from over 3% in 2000 to negative yield in 2012-2013. During this period of time the price of gold gained over 600%. From 2012 the real yield increased approximately 1% to 2015, while the price of gold fell almost 40% during this time. Since 2014 the real yield has remained relatively steady under 1% while the price of gold has stayed between 1200-1400. Gold is relatively expensive when the real yield on treasuries is high, and relatively cheap when the real yield on treasuries is low. If an investor can gain a high real yield after inflation by holding a 'risk free' treasury, then the opportunity cost of holding gold is comparatively high. This makes gold relatively less attractive since gold pays neither dividend nor interest. Treasury investors lose money during negative interest rates (when inflation is greater than the nominal interest rate). This makes gold more attractive despite having no yield. The Long-Term Real Rate Average index shown in the chart is described by the Treasury as, "the unweighted average of bid real yields on all outstanding TIPS with remaing maturities of more than 10 years and is intended as a proxy for long-term real rates." The price of gold can be compared to real yeild of treasuries from short term to long term. Another interesting comparison is the 3 month rate minus _CPI inflation. What's your thoughts? Do you expect the real yield on treasuries to increase or decrease in the years ahead? Where do you expect the price of gold will be in the coming years? More info: en.wikipedia.org papers.ssrn.com www.pimco.ca
FX:XAUUSD
by dime
2
The Bond Yield SituationI just was surfing charts and wanted to point this out, as the main theme from the media and analysts is that yields are going up. Period. I agree in that I think rates will be higher if measured in years or decades, but shorter term, they are at stiff resistance. This monthly chart going back to the mid 1960's has a very clear downward trend line that we recently tested and failed. Since we're talking decades-long trends, it will not be overcome easily or quickly, barring some catastrophe by the FedRes or an implosion of the economy. The latter seems unlikely given the data, but the former is certainly possible. That's not to say I expect them to screw up, but just that it seems to be the more likely factor that would greatly impact the US Treasury market. Anyways, take it for what it's worth, but the "rising rate environment" mantra is not as written in stone as some proclaim. We'll revisit this in a few decades to see what happened. ;)
T
by EchoAlphaBravo
Big spread between 5 y to 30 y treasuriesWatch this immense gap between the 5 y treasuries and the thirty years bonds. It will close sooner or later and I don´t expect the 5-y to fall or not far enough to close it. We´ll see probably a fast rise of yields in the 30- y bonds and this will cause much losses to the investors who are not aware of this. Sure, the indicators are signalling a correction in the near time. But with the FED prognosting more little steps of rising interest rates, a shorting of the QE and with positive signals coming from economy and labour market, I expect the yields going up in the long run.
F
by Luettis
Short Bonds & Long Copper | Copper/Gold vs. 10yr YieldsIt looks like the Bond market hasn't priced in growth or we're going to see a nasty reversion trade in the materials sector and a bond pop. The Copper / Gold pair is a great proxy for inflation due to the divergent properties of the 2 metals. Copper is purely an industrial metal and a proxy for inflationary growth so the 10yr reacts correspondingly. Gold, on the other hand is a precious metal and trades similar to a monetary instrument and is loosely correlated to the long-end from the inverse yield relationship.
COMEX:HG1!Short
by mattcook
Short Term Short TLTStill think rates will head lower due for a myriad of reasons, but in the short term, it is plausible that rates will go higher for technical reasons. Longer-Term Reasons for lower rates (i.e. lower for longer)- 1) Monetary Policy remains accommodative 2) Growth/Inflation expectations remain subdued 3) Foreign buying interest from places with negative yields on rates (see japan, europe) Near term reasons for the long bond to go up in yield- 1) Hawkish Fed Talk 2) Technicals as seen in the diagram (e.g. long term toppyness, decelerating RSI, declerating CCI, potential MACD bearish cross-over)
NASDAQ:TLTShort
by dsorchestra90