To Lock in Or Not To Lock In, That Is The Question

If you’re out of stocks and sitting in T-bills, you may have noticed lately that longer term bond yields have fallen sharply. For instance, the yield on the 10 year Treasury note has fallen from 3.20 to 2.75 over the past 7 weeks.

If you’re interested in bond investments, I suspect that you are wondering why I didn’t tell you to lock in those juicy 3%+ yields. Meanwhile there’s been some talk about the Fed slowing, or stopping its interest rate increases. It feels as though we may have missed the boat!

So should we lock in long term yields now and buy bonds, or sit tight collecting 2.4% or so in short term Treasury bills.

To help you decide, here’s a review of the charts of the 10 year note yield and the 13 week bill rate, along with my recommendation.

PPT Called In, Dow Gains A Thousand Points of Light

‘T was the day after Christmas and all through the bourse,
A rally was surging thanks to seller’s remorse.
Or was the Plunge Protection Team really the source.

Regardless of reason, it was truly spectacular,
Never 20% down, no bear market in Wall Street’s vernacular.
The post Christmas rally gave bulls some hope,
But bear markets are built on just such a slope. 

So this rally may give you some holiday cheer,
But the Fed is still tightening.
Which should make you hear,
“Don’t fight the Fed!” 
Not now or next year!

So my friends, as we wrap up this troubling year and look forward to Auld Lang Syne, the market spent the day after Christmas, known as Boxing Day in many parts of the world, punching bears like me in the face.

But that’s ok. I have seen a lot of bear markets. I sat through my first one in 1968-69 in the customers’ gallery at Walston and Company. Then again in 1970-71. And, of course, the big one in 1973 and 74. No, I don’t remember 1929-32!

So I went to the wayback machine and took a look at past 5% up days to see what we might learn from them. And boy was it interesting! History is such a good teacher. As the wise ones say, it may not repeat exactly, but it usually rhymes. Better than my terrible poetry. So here is the lesson of history, and what we should do about it.

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