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Cyclical Bond Reversion on Track

Cyclical Bond Reversion on Track

Charter Trust Company
By Mark Ungewitter
June 21, 2013 

The evolving bond-market reversion, which  I have explored here and here, is on track to produce yields of 4.0% on 30-year Treasury bonds and 3.0% on 10-year Treasury notes.  (See charts 1 & 2 below.)  This would constitute a normal process which has occurred time after time in recent decades, even in the post-ZIRP environment.

So, what could go wrong with the full-cyclical-reversion scenario?  Lots of things, of course.  In particular, a severe equity-market correction might limit the yield on 10-year notes to the vicinity of the 200-week moving average as noted in Chart 2.  This caveat is worth mentioning as we approach the 200-week average in an environment of equity weakness.

Mark Ungewitter is a Vice President at Charter Trust Company’s Concord office.  He can be reached at 603-224-1350 or via email at:  mungewitter@chartertrust.com.

Chart 1 (click to enlarge)

Chart 2 (Click to enlarge)

By |2013-06-24T09:16:15+00:00June 24th, 2013|Categories: Market Strategy Report|0 Comments

About the Author:

Mark Ungewitter is a Senior Vice President & Investment Officer at Charter Trust Company. He was formerly Director of Portfolio Management at Investors Bank and Trust in Boston, Massachusetts. He holds an M.S. from Bentley University and a B.S. from Massachusetts College of Liberal Arts. He is a member of the American Association of Professional Technical Analysts.

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