I've updated the charts below through Friday's close. The S&P 500 is now 7.66% off its interim high set on September 14th, the day after QE3 was announced. We're still above the 10% correction benchmark. The 10-year note closed Friday at 1.58, which is 30 basis points off its interim high of 1.88, also set the day after QE3 was announced. The historic closing low was 1.43 on July 25th. But the big news as of Friday is Freddie Mac's Weekly Primary Mortgage Market Survey. The 30-year fixed has set an all-time low of 3.34 percent.
Are yields heading lower? If the post-election selloff in equities continues, the 10-year yield could certainly revisit the levels of late July. Japan is an example (admittedly an extreme one) of a developed nation with its own currency that has experienced a relentless demand for government bonds, as this chart illustrates. Currently Japan's 10-year yield is around 0.75, less than half that if its US counterpart.
Here is a snapshot of selected yields and the 30-year fixed mortgage one week after the Fed announced its latest round of Quantitative Easing.
The 30-year fixed mortgage at the current level no doubt suits the Fed just fine, and the low yields have certainly reduced the pain of Uncle Sam's interest payments on Treasuries (although the yields are up from their recent historic lows). But, as for loans to small businesses, the Fed strategy continues to be a solution to a non-problem. Here's a snippet from the latest NFIB Small Business Economic Trends report:
Access to credit continues to be low of the list of small-business owner concerns. Twenty-eight (28) percent reported all credit needs met, and 52 percent explicitly said they did not want a loan (64 percent including those who did not answer the question, presumably uninterested in borrowing as well).
A Perspective on Yields Since 2007
The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the New York Fed's website for the FFR.
Now let's see the 10-year against the S&P 500 with some notes on Fed intervention.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective.