Dollars and Jens
Wednesday, June 13, 2007
interest rates III, and financial journalism
U.S. 10-year Treasuries surged the most since February after yields at a five-year high convinced speculators that rising borrowing costs will curb the economy and inflation.You might think traders would have thought of that yesterday, when they were pushing those borrowing costs up.
I do think the bond market is one of the economy's great stabilizers, tightening credit in the face of strength and inflation and vice versa.
One gauge of momentum shows Treasuries were poised to rise after the worst start to a month in three years. The 14-day relative strength index for the 10-year note futures was 19 today, the 10th straight day under 25. Readings below 30 indicate the note's price may rise, while readings above 70 indicate it may fall.Readings below 30 indicate it may rise. Or it may not. If you were counting "may" as "will", you would have lost money for ten straight days before today. It's nice that they stepped back and made their statement meaningless.
The RSI is an indicator of momentum. It seems to be most often used as suggested here, with extreme values presaging a reversion to the mean, but in some contexts it's used by momentum followers to mean the exact opposite.