Bond Forecaster Index

To predict the 10 year U.S. bond yield, we input the following parameters:

• 3-2 year treasury which predicts the slope of the yield curve
• GDP which predicts the 10 year yield 
• Fed balance sheet which has a direct effect on inflation and yields
• USD index which is negatively correlated to bond yields
• Debt issuance which increases bond yields

The same chart but with GDP substituted data.

 

The holy grail for bond forecasting depends on the Taylor Rule rate, which is a leading indicator for bond yields.

 

 The second derivative of the same chart.

To check how the yield curve will evolve, you can look at the leading indicator 3-2 year treasury yield.

 

When foreigners sell treasuries, bond yields go up.

Bond Value = Money Printing + Budget Deficits.

Deficits are going higher.

The Citigroup economic surprise index predicts yields.

The Fed has its bond valuation model (link 2). Buy bonds when the chart is above zero.

Check the natural rate of interest R-Star from the New York Fed and compare it to the Real 10 Year Bond Yield.

 

Maturing bonds. 

QT Runoff 101In the chart below the Blue column is the amount of Bonds and Notes maturing on the Fed's balance sheet. Each month when the blue line is above the 60BN which is the QT cap the Fed proportionally buys bonds across the curve using "add-ons" August is a huge month.

Treasury supply estimates.

Slides here.

Charles Nenner cycle.

Historic look on bonds.

Historic look on interest rates.

Watch Callum Thomas inflation rate model.