What does bond know?
This graph displays the relationship between two economic indicators over time:
1. US 10s Yield (white line) - This represents the yield on 10-year U.S. Treasury bonds, shown on the right axis.
2. Citi Economic Surprise Index - USA (orange line) - This index measures how economic data releases compare to economists' expectations. It's shown on the left axis.
Key observations:
1. The US 10s Yield has been fluctuating, with recent trends showing a decrease. This suggests falling interest rates on long-term U.S. government bonds.
2. The Citi Economic Surprise Index for the USA has been volatile but is currently in negative territory (below 0). This indicates that recent economic data releases have been worse than economists' expectations.
3. There appears to be some correlation between the two metrics, though it's not perfect. Often, when the Surprise Index rises, yields tend to increase as well, and vice versa.
4. The recent sharp decline in the Surprise Index (orange line) is particularly notable, suggesting a period where economic data has consistently underperformed expectations.
5. The current reading of the Surprise Index is around -20, which is quite low, indicating significant negative surprises in economic data.
This graph is useful for understanding the relationship between economic performance relative to expectations and long-term interest rates. The recent downward trends in both metrics could suggest concerns about economic growth or changing monetary policy expectations.
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This is really helpful to investors