Examination of Long and Short -Term Interest Rates – 04/28/23

On 05/03/23 the U.S. FOMC will announce their decision on short – term interest rates.  A look at the charts of 13 – week U.S. Treasury Bill rates (IRX) and 30 – year U.S. Treasury Bond yields (TYX) give hints to what may happen in the coming months.

The monthly IRX chart courtesy of Trading View shows us the long – term picture.

The IRX gives a representation of the actions taken by the FOMC.   IRX has now reached the area of the previous peak back in 2007.  The monthly RSI is deep in the overbought zone and MACD – Histogram has a bearish divergence.  These factors suggest a pause in the rise of short – term rates.  

A pause not a decline.  In 2000 and in 2007 short-term rates could decline because of  low inflation.  In the current U.S. economy, it’s unlikely the high inflation rate will decrease – at least not for several months.    

The daily TYX chart illustrates the action of long -term yields since mid – 2022.

The FOMC does not control long -term rates/yields, they move on market factors.   After the TYX peak in October 2022 its been in a sideways corrective pattern that looks like an Elliott wave Horizontal Triangle.  It appears the pattern could be nearing completion. 

If TYX  does not go below the Minor wave “C” bottom, there’s a good chance TYX could rise for several months.  If long – term interest rates climb this could have an adverse effect on home and  auto purchase, as well as buying stocks on margin. 

The powerful rally in U.S. stocks after the 04/26/23 bottom could be in anticipation of an FOMC  pause in rate hikes.  If there is a pause in short- term rate increases this probably won’t improve the U.S. economy. 

The FOMC has been raising rates to slow down the U.S. economy.  The current higher short -term interest rates are probably already slowing down the economy, which could stay slow for several months.  In the meantime, if long-term rates rise, it could  make the economic contraction worse.

If U.S. stocks rise next week they could make an important top.


Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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