Research Excerpts

Where Are US Interest Rates Headed In Q4?<br>Watch TIPS Spreads.

Posted on: Tuesday, October 16th, 2012

The following (green text) is an excerpt from our Monday October 15th Keys To This Week report.

Keys To This Week, one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month, is a detailed weekly outline of key market factors and corresponding charts pertaining to the US stock market and market sectors, US interest rates, and the US Dollar, that are most likely to influence US financial market direction during the upcoming week.

excerpt from Keys To This Week
October 16th, 2012
Key #2 of 11, US Interest Rates & Treasuries

Key # 2> Credit Spreads: 10-Year TIPS Breakeven Rate. Chart 6 below shows that the 10-year TIPS Breakeven Rate (the difference between the yield of the 10-Year Treasury Note and 10-Year Treasury Inflation Protected Securities, blue line middle panel) is currently at quarterly overbought extremes (red line lower panel), indicating an extreme in investor expectations for upcoming inflation 10 years from now.

Chart 6

The green vertical highlights between all three panels show that, as a contrary indicator, similar wide extremes in the spread have coincided with every important bottom in the iShares 20+ Year Treasury Bond ETF (TLT), and coincident peak in long term US interest rates, since 2008.


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