Monday, December 19, 2011

Ten Year/Thirty Year Treasury Spread

At the end of today's trading, the 10 year treasury is yielding 1.81%.  By comparison the 30 year bond is yielding 2.80%, which is a spread of almost 100bps.  As shown in the chart below, this is fairly close to a multi-decade high.  Earlier this year we reached a 150bps spread.  At that point the spread was between 3% on the 10 year and 4.5% on the 30 year though.  If the 10 year bond stays anchored, it's not inconceivable that the 30 year bond could hit the low 2% level.  Given the duration of the long bond, that represents quite a high total return potential.

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