Observation On Interest Rates

From Market Anthropology:

"[W]e don't think most participants grasp how significant a move in 10-year yields was accomplished last year - and how improbable the expectations for a continuation higher is today.

Even when contrasting the bond market carnage in 1994 - brought on by the commencement of an unexpected Fed tightening cycle, the move in 10-year yields over the past year has been twice its magnitude. When viewed as a comparative study between these two time periods (normalized below by the month over month performance) you can see that even during an actual Fed rate tightening period in which the fed funds rate doubled from 3% in February of 1994 to 6% in February of 1995, 10-year yields crested only ~ 40% above the previous years low and started breaking down during the Fed's final rate hike in February of 1995. To put the move in even greater context, 10-year yields appreciated just shy of 70% from the entirety of the previous cycle low in June 2003 to the cyclical peak in June 2006. This encompassed a Fed rate tightening cycle which took the fed funds rate gradually from 1.0% in June 2004 to 5.25% in June 2006.

Over the past year, with just a posturing shift by the Fed to an eventual curtailment of quantitative measures, 10-year yields crested ~ 80% above the May 2013 breakout."

We don't agree that the taper of QE was what caused the interest rate increase - rather we think it was the delay of the beginning of the taper that caused if - but good observation on the magnitude of the interest rate move, nonetheless.