2019 has become the year where the bond market has seen yield decrease and bond prices move up. The 10-year Treasury note has continued its recent downtrend and has moved down to 2.61 percent, which is near a 52-week low. Will the yield on the note continue to move lower or will it bottom out? The future trend of yields will depend on how the economy performs over the next couple of months and how the Federal Reserve reacts to the economy and the markets.
Right now, the trend for yields looks to be heading lower. This is in contrast to the rising interest rate environment that lasted from the end of 2017 to the end of 2018. Even though the 10-year note’s yield has moved lower, short term rates continue to rise. The 13 week Treasury Bill has begun to move higher once again after cooling off at the end of 2018. The move in the short-term Treasury bill is interesting and is the opposite of what is occurring in longer-term Treasuries. If short-term rates continue to increase, will the economy be able to handle higher rates?
This year has started as one of the most interesting starts to a year as the stock market has rebounded from the significant drop that occurred at the end of last year. Interest rates will likely play a major role in how the stock market performs in 2019. Keeping an eye on the 10 Year Note and short term Treasury Bills will be important this year.