Last Wednesday we said to buy Treasuries, and one subscriber emailed in with this and that argument about the Fed and so forth (I love pushback on a story). Today with the break of 2% on the 10-year, the question is where can rates go in a flight-to-quality or flight-to-safety rally?
The two charts below show the yield on the 10-year U.S. Treasury bond.
The first chart is shorter term and the horizontal lines on the chart show where the yield can decline to -- the recent April/May lows followed by the low seen in early February.
The second chart covers a longer period of time and the horizontal line indicates the extreme lows of the cycle, with the 10-year printing briefly at the 1.40%-1.38% area. Not sure if we could revisit that low yield level again, but you never know.
So how can you play this? Consider anything that is rate sensitive.
Toll Brothers (TOL) reports this week and is down 3.93% today to around $38.39. "(You) might want to buy half ahead given how sensitive it is to rates," TheStreet's Jim Cramer said.
Separately, risk aversion among investors could bode well for upcoming auctions of U.S. government debt. The Treasury Department will sell $90 billion in coupon-bearing debt next week, including $26 billion in two-year notes, $35 billion in five-year notes and $29 billion in seven-year notes, according to Reuters.
-- By Bruce Kamich and Sebastian Silva