Real 10-Yr Treasury Falls for Third Month

(Neutral) The real 10-year treasury rate was 0.85 percent in March, which was the third straight month of decrease. It was the lowest the rate has been since October. The nominal rate was 2.48 percent, which was relatively unchanged for the fourth month in a row. But, the rate of inflation was above 2.0 percent for the fourth consecutive month. Increasing inflation is limiting the rise in the real 10-year treasury rate even though the nominal rate has increased (the real rate is the nominal rate minus inflation). 

The year-over-year change in the real rate decreased to -63 basis points. That ended four straight months of an increase.  The year-over-year change in the real rate has not moved much the last four months

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 negative leading indicator for capital spending.