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U.S. Treasury bonds and bond ETFs provide stable income in the worst of times and watching the relationship of bond yields to each other and the relationship of TLT versus SPY as representing the stock market can show investors whether they need to be in or out of the market. In the link above, if SPY, the S&P 500 ETF is leading TLT, then it is safe to be in the market by this indicator. Of course, additional indicators should be used also to confirm the risk-on/risk-off strategy.

Another indicator to watch is the 10-year treasury bond yield. If the chart shows the yield in a clear downtrend, and the 50-day line has broken the 200-day line in a death cross, then stocks should not be held. TLT, the 20+ year treasury bond ETF, is one of the best bond stocks to hold in a market risk-off situation.

One more treasury indicator is very important to monitor. That is the relationship between the 10-year bond and the 2-year government bond. You can look at bond yields at this U.S. Treasury link. If the spread between the 10-year yield and and the 2-year yield is greater than 2%, then stocks should be held. If the spread is less than 2%, you are better off holding bonds and bond stocks. I will be listing the data of this 10-2 yield relationship intermittently in the table below. The first entry in the table shows a risk-off relationship with stocks.
Date10-year yield2-year yieldDifference
August 15, 20142.34%.42%1.92%
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