Tuesday, February 19, 2008

Cracks Emerging in the Treasury Market Rally?

From Bloomberg:

Treasuries fell, pushing the 10-year note's yield to the highest level in more than a month, on speculation accelerating inflation will prompt the Federal Reserve to be less aggressive in cutting borrowing costs.

U.S. debt securities extended their decline after an industry report today showed confidence among homebuilders had its first back-to-back monthly increase in almost a year. Traders eliminated bets the Fed will lower the target lending rate by three-quarters of a percentage point at its meeting next month, in favor of a smaller reduction.

``The Fed is almost done easing because the market won't allow more,'' said Mark MacQueen, a partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $5 billion. ``Every day that passes, people become less assured there's going to be a recession. I find little value in Treasuries.''

Here is a year long daily chart of the long end (20+ years) of the curve.

Notice the clear break of the uptrend that has been in place since early July.