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Treasury Yields Were Mixed amid Oil Price Volatility

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Secondary market

Treasury yields rose across the yield curve—except for one-month Treasury bills, three-month Treasury bills, and three-year Treasury notes—in the holiday-shortened week ending December 31, 2015. Oil price volatility led movements across the markets. The yield on the benchmark ten-year note ended at 2.3%. It rose by six basis points from the previous week.

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Marc Faber’s views

Marc Faber is the author of the Gloom, Boom & Doom Report. In an interview, he said that “I believe that we’re already entering a recession in the United States, and US stocks will fall in 2016.” Faber recommends Treasuries. He thinks that the US economy wasn’t strong enough to withstand the interest rate hike. The Fed announced the hike on December 16.

Economic indicators

Pending home sales fell by 0.9% on a month-over-month basis in November. They rose by 5.1% on a YoY (year-over-year) basis. Home sales data rose for homebuilders and home improvement companies like Lennar (LEN), PulteGroup (PHM), D.H. Horton (DHI), and Home Depot (HD).

Investment impact

A rise in Treasury yields across the yield curve led to a fall in mutual funds’ returns. Prices and yields are inversely related.

Week-over-week, the Dreyfus US Treasury Long Term Fund (DRGBX) and the MassMutual Select Strategic Bond Fund – Class A (MSBAX) fell by 0.8% and 0.1%, respectively.

Several Treasury notes, or T-notes, auctions took place last week. We’ll look at them in detail. We’ll start with the auction for seven-year T-notes.

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