Time Frame: Intermediate
Category: Monetary

Description

Long-term treasury bonds compete with stocks for investment dollars. Falling interest rates reduce borrowing costs, stimulate economic growth, and increase corporate earnings. This reduces the attractiveness of treasury securities and inducing investors to buy stocks. Historically, falling bond yields have supported stock prices, while rising yields have led to corrections.

Calculation & Significant Levels

Long Bond Rate of Change: The six-month rate of change in the long-term Treasury bond yield. A positive rate of change (rising yield) greater than 10% is bearish, and a negative 10% change is bullish.

Formula:
(current long bond yield - long bond yield six months prior)
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              (long bond yield six months prior)

Gauge Elements: Magnitude
Updated: Weekly (as of Friday close)

Strategy