Economic News Blog
Posted by: Steven Kline, Jr. 17. June 2016

Real 10-Yr Drops from Year Ago

(Positive) The real 10-year treasury rate was 1.21 percent in May 2016. This was the lowest level for the real rate since April 2015, and it was the fourth month in a row that the real rate was below 1.5 percent. Since the Fed announced it was raising its overnight rate, the real 10-year treasury rate has dropped each of the last six months. Apparently, the market does not see things the same way as the Fed. The change in the real 10-year treasury rate decreased for the fifth consecutive month. And, for the first time since April 2015, the real 10-year treasury dropped from its level of a year ago. 

The 10-year treasury rate is good leading indicator of the money supply, housing permits, consutrction spending, and consumer durable goods spending. A falling real interest rate should lead to more housing permits, construction spending, and consumer durable goods spending. This means that the real 10-year treasury rate is now a positive leading indicator for capital spending. 

The real 10-year treasury rate rate is an important leading indicator for the following industries: appliancesautomotivecustom processorsfurniture manufacturinghardwareHVACmetalcutting job shopsoff-road/construction machinerypetrochemical processorsplastics/rubberpumps/valves/plumbing productstextiles/clothing/leather goods; and wood/paper.

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