Here is a monthly bar chart showing yields for the 10 year treasury note. I'd like to use this chart to update my bond market forecast which I posted January 22, 2006.
As you can see the 10 year note yield has reached the 5.25% level, just a little higher than the 5.20% estimate I offered in my forecast. The high yield so far has occurred on June 29, just a little earlier than the August-September time frame suggested in my 2006 bond market forecast.
Note that the move up from the 3.07% low yield in June 2003 to the recent high yield at 5.25 is just a bit more in percentage terms that the 66% increase in yields from the 1998 low yield of 4.10% to the 2000 high yield of 6.82%. Moreover, the move up in yields from the 2003 low at 3.07% has developed the classic three phase shape common to corrections and move within a trading range.
These facts all support my current view that the high yield of 2006 has been established at the 5.25% level and that the 10 year yield has begun an extended drop. I will be convinced of this if we can close the month of August at 4.97% or below.
If the high yield has been seen as I suspect then we shall probably see a period of 18 months during which the 10 year yield gradually drops with the ususal zig-zags in between. I think a drop of 100-150 basis points will prove to be a good estimate for the extent of the interest rate decline.