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b"A Rare Down Day
\\nThe U.S. stock market finally had a rare down day today.\\xa0 The Dow Jones was down almost 180 points.\\xa0 We did have a little bit of a rally off the lows. NASDAQ closed down 39 points.\\xa0 But still, it's rare to see the U.S. stock market going down.\\xa0 Supposedly, the catalyst for the sell-off today was the increase in long-term interest rates.\\xa0 Long-term interest rates have been rising steadily all year, so the market hasn't cared about rising interest rates at all this year, so I don't know why today is any different.\\xa0 The yield on the 10-year bond moved above 2.7%\\xa0 This is not quite a 4-year high in yields; the high was 2.725%.
\\nWhy Buy Treasuries at All?
\\nThat's the 10-year.\\xa0 The yield on the 30-year is at 2.943.\\xa0 Why would anybody buy a 30-year treasury for 2.93%.\\xa0 You could just buy a 10-year for 2.7. Twenty extra years of interest rate and inflation risk? Why would somebody assume that for a 20 basis point in yield? To me, it doesn't make sense that anyone would buy any Treasury, regardless of the duration.
\\nWhy Hasn't the Yield Curve Already Blown Out?
\\nBut if you are going to buy a long-term Treasury, why on earth would you go for 30 years?\\xa0 Just buy a 10-year.\\xa0 The yield is almost the same.\\xa0 But if we get a big increase in interest rates, the collapse in the value of the 30-year is going to be much bigger than the 1o-year.\\xa0 In fact, that seems to be a pretty good trade for a spread trader.\\xa0 Buy the 1o-year and short the 30-year.\\xa0 That spread has got to widen. That extra 20 years of inflation risk and interest rate risk is going to come back to bite anybody who is buying a 30-year treasury.\\xa0 So it doesn't even make any sense to me why the yield curve hasn't already blown out. It's going to happen.\\xa0 It's only a matter of time.
\\nIf Anyone Cared, The Drop Would Have Bigger
\\nI don't think the markets are worried about higher interest rates.\\xa0 The Dow is down 170 points.\\xa0 That's nothing. If anyone was actually worried about higher interest rates, we would have had a much bigger drop.\\xa0 Who knows why the market was down - that's the excuse, but it can't be rates, because this has been happening consistently and nobody has cared.\\xa0 If anybody cared, we would have had a much bigger drop in the stock market.
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