Interest Rate Monitor: December 2019

On October 7, 2019, when the 3-month treasury sat at 1.75%, we said the following:

“Tentatively, we expected the 3-month Treasury will decline into the range of 1.62% to 1.39%.”

By October 30, 2019, the Federal Reserve lowered rates when the daily 3-month Treasury was at 1.62%.  Since that time, a pattern has emerged which is worth a quick take.

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The cut in interest rates by the Fed has coincided with the 1.62% level.  This will change as time goes on.  However, for now, we see more downside is possible.  This is dependent on whether a break of the November 1, 2019 low is breached to the downside or not.

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On the long-term chart from the low in 2015, we can easily see how support level at 1.39% has been broken to the downside.  However, as has been the established pattern since the March 21, 2019 peak, Fed rate cuts have coincided with breaking below a prior low.

If the November 1, 2019 low, at 1.52%, is broken then we can reasonably expect at least another decline to the 1.30% level and maybe more before another rate cut by the Federal Reserve.

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