Interest rates have shot up since July. But have they “stretched too far too fast?”
One way to measure if an asset has made a rare/extreme short-term move is too see how far above or below its 200-day moving average it is.
Below looks at the yield on the 10-year note going back to the early 1980s.
The sharp rally in yields over the past 5 months finds the yield on the 10-year note 29% above its 200 MA line at (1) above. Only one other time in the past 35 years has yield been that far above its long-term moving average.
At the same time, yields are way above the 200 MA line and are also testing the top of a 25-year falling yield channel as well.
Are rates stretched too far to the upside? The long-term falling trend in rates is being tested right now and the results could be very important from a macro point of view and for portfolio construction.