US 10 year
October 5th, 2020
⏰ 1 minute read
⏰ 1 minute read
Breaking higher...
The one thing
What’s the one thing you look at every day without fail to see how the financial markets will do that day? Is it the Dow overnight or the rupiah in the morning? For me it has been for as long as I can remember the US generic 10 year bond yield. Right now the yield is jumping & I’m excited.
Barometer of growth
The reason why I watch the 10 year yield is because it’s arguably the most liquid market in the world. It’s where money from all over the world goes to for safety. If you believe that growth is the opposite of safety then the US 10 year is the barometer of growth. When yields go up it means faster growth.
Below 1%
The world’s big problem is a lack of growth. The US 10 year yield has been declining ever since I started watching it. It finally increased in 2017 & 2018, but then fell back in 2019 & in 2020 the yield has fallen below 1%. The lowest level was 0.5%, but that’s still much higher than any other major markets.
Growth
That’s because the US has become the only country which can provide economic growth. This means that we need the yield to go up & it’s only expectation of faster economic growth which will cause it to go up. The yield has recently been stuck below 0.7%, but today it’s finally breaking above that level & is right now 0.73%.
Indonesia
How does Indonesia fit into this? Our 10 year bond yield is the opposite of the US yield. When lower US yields indicate flight to safety & slower growth, that means higher risk premiums & higher yields here in Indonesia. When US yields rise like now, that allows risk premiums to fall & our bonds, currency & stocks can rise.
What’s the one thing you look at every day without fail to see how the financial markets will do that day? Is it the Dow overnight or the rupiah in the morning? For me it has been for as long as I can remember the US generic 10 year bond yield. Right now the yield is jumping & I’m excited.
Barometer of growth
The reason why I watch the 10 year yield is because it’s arguably the most liquid market in the world. It’s where money from all over the world goes to for safety. If you believe that growth is the opposite of safety then the US 10 year is the barometer of growth. When yields go up it means faster growth.
Below 1%
The world’s big problem is a lack of growth. The US 10 year yield has been declining ever since I started watching it. It finally increased in 2017 & 2018, but then fell back in 2019 & in 2020 the yield has fallen below 1%. The lowest level was 0.5%, but that’s still much higher than any other major markets.
Growth
That’s because the US has become the only country which can provide economic growth. This means that we need the yield to go up & it’s only expectation of faster economic growth which will cause it to go up. The yield has recently been stuck below 0.7%, but today it’s finally breaking above that level & is right now 0.73%.
Indonesia
How does Indonesia fit into this? Our 10 year bond yield is the opposite of the US yield. When lower US yields indicate flight to safety & slower growth, that means higher risk premiums & higher yields here in Indonesia. When US yields rise like now, that allows risk premiums to fall & our bonds, currency & stocks can rise.
