4 Year Presidential Cycle: Bond edition

July 5, 2006 7:54am by

Last week, we looked at the 4 Year Presidential Cycle and equities, via Birinyi Associates. Today, we take a look at similar data as it applies to fixed income instruments:

"With so many investors concerned over interest rates, we wondered if they follow cyclical tendencies as well. The chart to the lower right plots the YTD percent change in the ten-year bond yield vs the average YTD change in ten-year yields during the second year of a presidential term. Like the chart for the S&P 500, this year is following a similar pattern to the average, although the magnitude of the move this year is considerably greater than the average move. This would imply that bond yields are near their peak for the year."

If the cycle holds true this year, bond yields should be heading lower in the second half, with allthat implies . . .

10 year bond change, 4 year cycle

10_year_bond_change_4_year_cycle

Source: Birinyi Associates, Inc.

Avg_change_10year_chart

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What's been said:

Discussions found on the web:
  1. jab commented on Jul 5

    Sorry but this chart is worthless – the table shows the returns are all over the board. On average yield go up the first half of the year – they either had to go up or down. This year they have went up – it was 50/50 if they went the same way as the average. The scale on the left and right are so different as well.

  2. J commented on Jul 5

    For the chart to be useful, it would have to be shown with eorror bars for standard deviation… and look at the price of bonds % change, not yield % change. There are a lot of mathematical problems with looking at yield % change.

  3. sell_the_10_year commented on Jul 5

    Here is the long term 10-year yield.

    If you draw a straight line that touches the highs since the peak in the 80s, you get a pretty clear broken trendline for the bull market in treasuries.

    Besides, if this guy is right, I’m going to have to come up with a new name to post under……

  4. royce commented on Jul 5

    Isn’t the yield supposed to be going up at a time of inflation?

  5. Detroit Dan commented on Jul 5

    sell_the_10_year — Let us know when you change your posting name, and what factors, in addition to this chart, you considered…

  6. sell_the_10_year commented on Jul 5

    Detroit Dan,

    Not considering it today, bonds sold off pretty hard.

    Let’s see, I am basically considering the price of oil and gold. Oil is up 700% in less than eight years. If that isn’t inflationary I don’t know what is.

    In a word, stagflation. It’s here, and it’s getting worse.

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