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Treasury Yields: A Real-Time Market Sentiment Gauge

Posted on May 16, 2008

Suppose we could conduct a poll each day of traders and investors, asking them for their outlook on the strength vs. weakness of the U.S. economy? That might provide some useful sentiment data.Well, we have something better than a self-report poll, which may or may not reflect the actual market behavior of these participants. The rise and fall of Treasury yields provides the market's real-time assessment of whether the economy is weakening or strengthening.If the economy is weakening and requires stimulus, anticipations of Federal Reserve easing will lead to falling short-term yields. If th...

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