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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Seasonal Treasury Yield fluctuations Date: 12/28/2009 11:07 PM
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The 10 Year Treasury yield has been popping since the beginning of December (about a month). It's almost up to the yield in July 2009.

http://stockcharts.com/charts/gallery.html?$TNX

The 10 Year Treasury yield fluctuates seasonally. It's usually highest in midyear, due to increased demand for mortgages during the spring home buying season. It's usually lower during the winter.

I analyzed the 10 Year Treasury yield to determine whether that rule of thumb holds, and if so, by how much.

To do any analysis, I needed a nice, consistent data set. I didn't want perturbations by financial crises.

The following chart shows two different periods with a nice, even fluctuation around a linear trend during reasonably calm economic times and steady inflation. One is the period from 1987 to 2002, when the yield declined. The other is the period from 2003 to 2007, when the yield trend increased.

http://research.stlouisfed.org/fred2/series/GS10

These were obviously different situations, so I analyzed them separately. I removed the data from Feb. 1993 to Jan. 1994, because the yields were unusually low (the first year of the Clinton presidency).

The 1987-2002 trend's R-squared was 0.86, quite strong. The 2003-2007 trend's R-squared was only 0.47, but still worth looking at.

I analyzed the monthly deviation from the trend line.

Result: As expected, May - July averaged yields above the trend. December averaged yields below the trend.


Average deviation from trend

1987 to 2002 2003 to 07
January -0.13 -0.06
February -0.15 -0.10
March 0.02 -0.12
April 0.02 0.04
May 0.14 0.02
June 0.02 0.00
July -0.03 0.08
August -0.04 0.03
September -0.08 -0.13
October -0.12 -0.09
November -0.15 -0.17
December -0.18 -0.22



The increase in the 10 Y Treasury yield in December 2009 is atypical and contrary to the normal trend.

I think this is happening because the Federal Reserve ended its Treasury purchase program (October 2009) and has announced that it will stop buying mortgage backed securities in March 2010 -- a market that correlates and competes with the 10 Y Treasury. Also, this may be a reaction to China's stated intent that they can't increase their buying proportionally to the government's issuance of Treasuries.

As a result, I sold my Ginnie Mae funds. I plan to hold my TIPS to maturity, because I think the market is drastically underestimating the risk of inflation in the medium to long term.

Wendy (cross-posted on the METAR Board)

P.S. e-mail me if you want to see the spreadsheets.
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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29604 of 35400
Subject: Re: Seasonal Treasury Yield fluctuations Date: 12/29/2009 11:52 PM
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Wendy,

Probably a good move to get out of the Ginnie funds and they are pretty easy to get back into.

What did the set look like with Jan 93 - Fed 94? Removing a year in a 5 year set is a pretty significant "tweak". Especially since it has direct relevance to our current situation. The rates were low because the Fed was tickling them down throughout the 92 election season because of the recession "its the economy stupid" that was barely there.

<insert Greenspan confusing the market with economy rant here>

jack

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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29606 of 35400
Subject: Re: Seasonal Treasury Yield fluctuations Date: 12/30/2009 2:17 AM
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<What did the set look like with Jan 93 - Fed 94? Removing a year in a 5 year set is a pretty significant "tweak". >

I removed Jan 93 to Feb 94 from the set of 1987 - 2002. This was a 15 year set, not a 5 year set. I didn't tamper with the 5 year set, 2003-2007.

I have pasted all the data below. Though the 1993 rates seem high by today's standards, they were well below the trend line.

Wendy

DATE VALUE
04/01/53 2.83
05/01/53 3.05
06/01/53 3.11
07/01/53 2.93
08/01/53 2.95
09/01/53 2.87
10/01/53 2.66
11/01/53 2.68
12/01/53 2.59
01/01/54 2.48
02/01/54 2.47
03/01/54 2.37
04/01/54 2.29
05/01/54 2.37
06/01/54 2.38
07/01/54 2.3
08/01/54 2.36
09/01/54 2.38
10/01/54 2.43
11/01/54 2.48
12/01/54 2.51
01/01/55 2.61
02/01/55 2.65
03/01/55 2.68
04/01/55 2.75
05/01/55 2.76
06/01/55 2.78
07/01/55 2.9
08/01/55 2.97
09/01/55 2.97
10/01/55 2.88
11/01/55 2.89
12/01/55 2.96
01/01/56 2.9
02/01/56 2.84
03/01/56 2.96
04/01/56 3.18
05/01/56 3.07
06/01/56 3
07/01/56 3.11
08/01/56 3.33
09/01/56 3.38
10/01/56 3.34
11/01/56 3.49
12/01/56 3.59
01/01/57 3.46
02/01/57 3.34
03/01/57 3.41
04/01/57 3.48
05/01/57 3.6
06/01/57 3.8
07/01/57 3.93
08/01/57 3.93
09/01/57 3.92
10/01/57 3.97
11/01/57 3.72
12/01/57 3.21
01/01/58 3.09
02/01/58 3.05
03/01/58 2.98
04/01/58 2.88
05/01/58 2.92
06/01/58 2.97
07/01/58 3.2
08/01/58 3.54
09/01/58 3.76
10/01/58 3.8
11/01/58 3.74
12/01/58 3.86
01/01/59 4.02
02/01/59 3.96
03/01/59 3.99
04/01/59 4.12
05/01/59 4.31
06/01/59 4.34
07/01/59 4.4
08/01/59 4.43
09/01/59 4.68
10/01/59 4.53
11/01/59 4.53
12/01/59 4.69
01/01/60 4.72
02/01/60 4.49
03/01/60 4.25
04/01/60 4.28
05/01/60 4.35
06/01/60 4.15
07/01/60 3.9
08/01/60 3.8
09/01/60 3.8
10/01/60 3.89
11/01/60 3.93
12/01/60 3.84
01/01/61 3.84
02/01/61 3.78
03/01/61 3.74
04/01/61 3.78
05/01/61 3.71
06/01/61 3.88
07/01/61 3.92
08/01/61 4.04
09/01/61 3.98
10/01/61 3.92
11/01/61 3.94
12/01/61 4.06
01/01/62 4.08
02/01/62 4.04
03/01/62 3.93
04/01/62 3.84
05/01/62 3.87
06/01/62 3.91
07/01/62 4.01
08/01/62 3.98
09/01/62 3.98
10/01/62 3.93
11/01/62 3.92
12/01/62 3.86
01/01/63 3.83
02/01/63 3.92
03/01/63 3.93
04/01/63 3.97
05/01/63 3.93
06/01/63 3.99
07/01/63 4.02
08/01/63 4
09/01/63 4.08
10/01/63 4.11
11/01/63 4.12
12/01/63 4.13
01/01/64 4.17
02/01/64 4.15
03/01/64 4.22
04/01/64 4.23
05/01/64 4.2
06/01/64 4.17
07/01/64 4.19
08/01/64 4.19
09/01/64 4.2
10/01/64 4.19
11/01/64 4.15
12/01/64 4.18
01/01/65 4.19
02/01/65 4.21
03/01/65 4.21
04/01/65 4.2
05/01/65 4.21
06/01/65 4.21
07/01/65 4.2
08/01/65 4.25
09/01/65 4.29
10/01/65 4.35
11/01/65 4.45
12/01/65 4.62
01/01/66 4.61
02/01/66 4.83
03/01/66 4.87
04/01/66 4.75
05/01/66 4.78
06/01/66 4.81
07/01/66 5.02
08/01/66 5.22
09/01/66 5.18
10/01/66 5.01
11/01/66 5.16
12/01/66 4.84
01/01/67 4.58
02/01/67 4.63
03/01/67 4.54
04/01/67 4.59
05/01/67 4.85
06/01/67 5.02
07/01/67 5.16
08/01/67 5.28
09/01/67 5.3
10/01/67 5.48
11/01/67 5.75
12/01/67 5.7
01/01/68 5.53
02/01/68 5.56
03/01/68 5.74
04/01/68 5.64
05/01/68 5.87
06/01/68 5.72
07/01/68 5.5
08/01/68 5.42
09/01/68 5.46
10/01/68 5.58
11/01/68 5.7
12/01/68 6.03
01/01/69 6.04
02/01/69 6.19
03/01/69 6.3
04/01/69 6.17
05/01/69 6.32
06/01/69 6.57
07/01/69 6.72
08/01/69 6.69
09/01/69 7.16
10/01/69 7.1
11/01/69 7.14
12/01/69 7.65
01/01/70 7.79
02/01/70 7.24
03/01/70 7.07
04/01/70 7.39
05/01/70 7.91
06/01/70 7.84
07/01/70 7.46
08/01/70 7.53
09/01/70 7.39
10/01/70 7.33
11/01/70 6.84
12/01/70 6.39
01/01/71 6.24
02/01/71 6.11
03/01/71 5.7
04/01/71 5.83
05/01/71 6.39
06/01/71 6.52
07/01/71 6.73
08/01/71 6.58
09/01/71 6.14
10/01/71 5.93
11/01/71 5.81
12/01/71 5.93
01/01/72 5.95
02/01/72 6.08
03/01/72 6.07
04/01/72 6.19
05/01/72 6.13
06/01/72 6.11
07/01/72 6.11
08/01/72 6.21
09/01/72 6.55
10/01/72 6.48
11/01/72 6.28
12/01/72 6.36
01/01/73 6.46
02/01/73 6.64
03/01/73 6.71
04/01/73 6.67
05/01/73 6.85
06/01/73 6.9
07/01/73 7.13
08/01/73 7.4
09/01/73 7.09
10/01/73 6.79
11/01/73 6.73
12/01/73 6.74
01/01/74 6.99
02/01/74 6.96
03/01/74 7.21
04/01/74 7.51
05/01/74 7.58
06/01/74 7.54
07/01/74 7.81
08/01/74 8.04
09/01/74 8.04
10/01/74 7.9
11/01/74 7.68
12/01/74 7.43
01/01/75 7.5
02/01/75 7.39
03/01/75 7.73
04/01/75 8.23
05/01/75 8.06
06/01/75 7.86
07/01/75 8.06
08/01/75 8.4
09/01/75 8.43
10/01/75 8.14
11/01/75 8.05
12/01/75 8
01/01/76 7.74
02/01/76 7.79
03/01/76 7.73
04/01/76 7.56
05/01/76 7.9
06/01/76 7.86
07/01/76 7.83
08/01/76 7.77
09/01/76 7.59
10/01/76 7.41
11/01/76 7.29
12/01/76 6.87
01/01/77 7.21
02/01/77 7.39
03/01/77 7.46
04/01/77 7.37
05/01/77 7.46
06/01/77 7.28
07/01/77 7.33
08/01/77 7.4
09/01/77 7.34
10/01/77 7.52
11/01/77 7.58
12/01/77 7.69
01/01/78 7.96
02/01/78 8.03
03/01/78 8.04
04/01/78 8.15
05/01/78 8.35
06/01/78 8.46
07/01/78 8.64
08/01/78 8.41
09/01/78 8.42
10/01/78 8.64
11/01/78 8.81
12/01/78 9.01
01/01/79 9.1
02/01/79 9.1
03/01/79 9.12
04/01/79 9.18
05/01/79 9.25
06/01/79 8.91
07/01/79 8.95
08/01/79 9.03
09/01/79 9.33
10/01/79 10.3
11/01/79 10.65
12/01/79 10.39
01/01/80 10.8
02/01/80 12.41
03/01/80 12.75
04/01/80 11.47
05/01/80 10.18
06/01/80 9.78
07/01/80 10.25
08/01/80 11.1
09/01/80 11.51
10/01/80 11.75
11/01/80 12.68
12/01/80 12.84
01/01/81 12.57
02/01/81 13.19
03/01/81 13.12
04/01/81 13.68
05/01/81 14.1
06/01/81 13.47
07/01/81 14.28
08/01/81 14.94
09/01/81 15.32
10/01/81 15.15
11/01/81 13.39
12/01/81 13.72
01/01/82 14.59
02/01/82 14.43
03/01/82 13.86
04/01/82 13.87
05/01/82 13.62
06/01/82 14.3
07/01/82 13.95
08/01/82 13.06
09/01/82 12.34
10/01/82 10.91
11/01/82 10.55
12/01/82 10.54
01/01/83 10.46
02/01/83 10.72
03/01/83 10.51
04/01/83 10.4
05/01/83 10.38
06/01/83 10.85
07/01/83 11.38
08/01/83 11.85
09/01/83 11.65
10/01/83 11.54
11/01/83 11.69
12/01/83 11.83
01/01/84 11.67
02/01/84 11.84
03/01/84 12.32
04/01/84 12.63
05/01/84 13.41
06/01/84 13.56
07/01/84 13.36
08/01/84 12.72
09/01/84 12.52
10/01/84 12.16
11/01/84 11.57
12/01/84 11.5
01/01/85 11.38
02/01/85 11.51
03/01/85 11.86
04/01/85 11.43
05/01/85 10.85
06/01/85 10.16
07/01/85 10.31
08/01/85 10.33
09/01/85 10.37
10/01/85 10.24
11/01/85 9.78
12/01/85 9.26
01/01/86 9.19
02/01/86 8.7
03/01/86 7.78
04/01/86 7.3
05/01/86 7.71
06/01/86 7.8
07/01/86 7.3
08/01/86 7.17
09/01/86 7.45
10/01/86 7.43
11/01/86 7.25
12/01/86 7.11
01/01/87 7.08
02/01/87 7.25
03/01/87 7.25
04/01/87 8.02
05/01/87 8.61
06/01/87 8.4
07/01/87 8.45
08/01/87 8.76
09/01/87 9.42
10/01/87 9.52
11/01/87 8.86
12/01/87 8.99
01/01/88 8.67
02/01/88 8.21
03/01/88 8.37
04/01/88 8.72
05/01/88 9.09
06/01/88 8.92
07/01/88 9.06
08/01/88 9.26
09/01/88 8.98
10/01/88 8.8
11/01/88 8.96
12/01/88 9.11
01/01/89 9.09
02/01/89 9.17
03/01/89 9.36
04/01/89 9.18
05/01/89 8.86
06/01/89 8.28
07/01/89 8.02
08/01/89 8.11
09/01/89 8.19
10/01/89 8.01
11/01/89 7.87
12/01/89 7.84
01/01/90 8.21
02/01/90 8.47
03/01/90 8.59
04/01/90 8.79
05/01/90 8.76
06/01/90 8.48
07/01/90 8.47
08/01/90 8.75
09/01/90 8.89
10/01/90 8.72
11/01/90 8.39
12/01/90 8.08
01/01/91 8.09
02/01/91 7.85
03/01/91 8.11
04/01/91 8.04
05/01/91 8.07
06/01/91 8.28
07/01/91 8.27
08/01/91 7.9
09/01/91 7.65
10/01/91 7.53
11/01/91 7.42
12/01/91 7.09
01/01/92 7.03
02/01/92 7.34
03/01/92 7.54
04/01/92 7.48
05/01/92 7.39
06/01/92 7.26
07/01/92 6.84
08/01/92 6.59
09/01/92 6.42
10/01/92 6.59
11/01/92 6.87
12/01/92 6.77
01/01/93 6.6
02/01/93 6.26
03/01/93 5.98
04/01/93 5.97
05/01/93 6.04
06/01/93 5.96
07/01/93 5.81
08/01/93 5.68
09/01/93 5.36
10/01/93 5.33
11/01/93 5.72
12/01/93 5.77
01/01/94 5.75
02/01/94 5.97
03/01/94 6.48
04/01/94 6.97
05/01/94 7.18
06/01/94 7.1
07/01/94 7.3
08/01/94 7.24
09/01/94 7.46
10/01/94 7.74
11/01/94 7.96
12/01/94 7.81
01/01/95 7.78
02/01/95 7.47
03/01/95 7.2
04/01/95 7.06
05/01/95 6.63
06/01/95 6.17
07/01/95 6.28
08/01/95 6.49
09/01/95 6.2
10/01/95 6.04
11/01/95 5.93
12/01/95 5.71
01/01/96 5.65
02/01/96 5.81
03/01/96 6.27
04/01/96 6.51
05/01/96 6.74
06/01/96 6.91
07/01/96 6.87
08/01/96 6.64
09/01/96 6.83
10/01/96 6.53
11/01/96 6.2
12/01/96 6.3
01/01/97 6.58
02/01/97 6.42
03/01/97 6.69
04/01/97 6.89
05/01/97 6.71
06/01/97 6.49
07/01/97 6.22
08/01/97 6.3
09/01/97 6.21
10/01/97 6.03
11/01/97 5.88
12/01/97 5.81
01/01/98 5.54
02/01/98 5.57
03/01/98 5.65
04/01/98 5.64
05/01/98 5.65
06/01/98 5.5
07/01/98 5.46
08/01/98 5.34
09/01/98 4.81
10/01/98 4.53
11/01/98 4.83
12/01/98 4.65
01/01/99 4.72
02/01/99 5
03/01/99 5.23
04/01/99 5.18
05/01/99 5.54
06/01/99 5.9
07/01/99 5.79
08/01/99 5.94
09/01/99 5.92
10/01/99 6.11
11/01/99 6.03
12/01/99 6.28
01/01/00 6.66
02/01/00 6.52
03/01/00 6.26
04/01/00 5.99
05/01/00 6.44
06/01/00 6.1
07/01/00 6.05
08/01/00 5.83
09/01/00 5.8
10/01/00 5.74
11/01/00 5.72
12/01/00 5.24
01/01/01 5.16
02/01/01 5.1
03/01/01 4.89
04/01/01 5.14
05/01/01 5.39
06/01/01 5.28
07/01/01 5.24
08/01/01 4.97
09/01/01 4.73
10/01/01 4.57
11/01/01 4.65
12/01/01 5.09
01/01/02 5.04
02/01/02 4.91
03/01/02 5.28
04/01/02 5.21
05/01/02 5.16
06/01/02 4.93
07/01/02 4.65
08/01/02 4.26
09/01/02 3.87
10/01/02 3.94
11/01/02 4.05
12/01/02 4.03
01/01/03 4.05
02/01/03 3.9
03/01/03 3.81
04/01/03 3.96
05/01/03 3.57
06/01/03 3.33
07/01/03 3.98
08/01/03 4.45
09/01/03 4.27
10/01/03 4.29
11/01/03 4.3
12/01/03 4.27
01/01/04 4.15
02/01/04 4.08
03/01/04 3.83
04/01/04 4.35
05/01/04 4.72
06/01/04 4.73
07/01/04 4.5
08/01/04 4.28
09/01/04 4.13
10/01/04 4.1
11/01/04 4.19
12/01/04 4.23
01/01/05 4.22
02/01/05 4.17
03/01/05 4.5
04/01/05 4.34
05/01/05 4.14
06/01/05 4
07/01/05 4.18
08/01/05 4.26
09/01/05 4.2
10/01/05 4.46
11/01/05 4.54
12/01/05 4.47
01/01/06 4.42
02/01/06 4.57
03/01/06 4.72
04/01/06 4.99
05/01/06 5.11
06/01/06 5.11
07/01/06 5.09
08/01/06 4.88
09/01/06 4.72
10/01/06 4.73
11/01/06 4.6
12/01/06 4.56
01/01/07 4.76
02/01/07 4.72
03/01/07 4.56
04/01/07 4.69
05/01/07 4.75
06/01/07 5.1
07/01/07 5
08/01/07 4.67
09/01/07 4.52
10/01/07 4.53
11/01/07 4.15
12/01/07 4.1
01/01/08 3.74
02/01/08 3.74
03/01/08 3.51
04/01/08 3.68
05/01/08 3.88
06/01/08 4.1
07/01/08 4.01
08/01/08 3.89
09/01/08 3.69
10/01/08 3.81
11/01/08 3.53
12/01/08 2.42
01/01/09 2.52
02/01/09 2.87
03/01/09 2.82
04/01/09 2.93
05/01/09 3.29
06/01/09 3.72
07/01/09 3.56
08/01/09 3.59
09/01/09 3.4
10/01/09 3.39
11/01/09 3.4

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