Category: Inverted Yield Curve
The analysis published under this category are as follows.
Sunday, September 08, 2024
RECESSION When Yield Curve Uninverts / Economics / Inverted Yield Curve
By: Nadeem_Walayat
A good reliable signaler for a recession and the next bear market will be when the yield curve uninverts. Whilst nothing is a done deal, however this signal is 90% reliable so on such a signal it would be wise to at least reduce exposure to over valued stocks heading towards uninversion. .Whilst also being prepared to ride out whatever a potential bear market delivers in better valued stocks where the risk is one of the recession changing the metrics as companies MISS earnings and thus become more expensive as their stock prices fall. That is the risk of investing in the stock market, a balancing act of mainlining exposure whilst riding temporary dips as one is acting without the benefit of hindsight.
Read full article... Read full article...
Sunday, October 01, 2023
UK and US Inverted Yield Curves and Bond Funds / Interest-Rates / Inverted Yield Curve
By: Nadeem_Walayat
Yield Curves
At the late 2021 peak of the stock market the US short end yield was zero, long end (20 year) at about 2%. so the yield curve was normal. By the time of the bear market low was starting to invert, with the short end 3.5% vs long end 3.8%, fast forward to day we have the short end at 5.5%, Whilst most recent yield action has seen the short end and the long end nudge higher, hence offering an opportunity to accumulate near the bond markets lows.
Read full article... Read full article...
Sunday, September 03, 2023
US Bond Market Yield Curve Inversion Current State / Interest-Rates / Inverted Yield Curve
By: Nadeem_Walayat
The yield curve is the Ten Year yield Minus 2 Year Yield - What it shows is when short money is more expensive (higher rates) then long money, why is that? Forward economic weakness thus lower forward rates? Yes that is a valid argument but I suspect that in large part is the WRONG conclusion, it is after all the consensus view, what the econofools regurgitate across MSM, long rates are lower because the market is discounting future interest rate cuts is WRONG!
Read full article... Read full article...
Friday, April 01, 2022
US Interest Rate Yield Curve 101 – Steep, Flat, Inverted – What’s The Difference? / Interest-Rates / Inverted Yield Curve
By: Chris_Vermeulen
The yield curve plots the current yield of a range of government notes and bonds in the “primary market.” The worldwide bond market – including private and government debt — currently represents about $120 trillion in outstanding obligations. The United States accounts for roughly $46 trillion (39%).
The U.S. government finances its spending by collecting taxes and issuing debt. More specifically, the U.S. Treasury funds deficit spending by issuing debt instruments with a range of maturities.
- Treasury Bills have maturities from one month to one year.
- Treasury Notes have maturities from two to ten years.
- Very long-term debt is issued as Treasury Bonds with 20- and 30-year maturities.
Friday, March 25, 2022
The Yield Curve flattener and a Coming Transition / Interest-Rates / Inverted Yield Curve
By: Gary_Tanashian
As the Yield Curve flattens, this inflation is different from the 2020 inflation
In 2020 an inflationary yield curve steepener was in the bag as the Fed dropped and pinned the Funds Rate and sucked up every bond it could get its hands on (in order to monetize/print). The bond market made the logical signals about the resulting inflation as the short end was pinned by a combination of Fed policy and the frightened, risk ‘off’ herds clustered in T-Bills and short-term Treasuries, relative to the long end.
Gold and then stocks picked up on it first, followed by commodities, which were tardy but are now the star performer late in the inflation cycle. Hmm…
Side Note: The most buyable looking chart in the lower panels? On this big picture, that would be gold.
Read full article... Read full article...
Wednesday, August 26, 2020
Fed Rules Out Yield Curve Control (for now) / Interest-Rates / Inverted Yield Curve
By: Gary_Tanashian
That we are even having this conversation is proof that we are and have been in…Wonderland for years now.
Since at least 2001, actually. Back then Alan the Wizard Greenspan (mixing classic fairy stories, I know) began pulling levers that could never be un-pulled. There were no breadcrumbs with which to find our way back. Off the charts is off the charts. Exponential is exponential. And that’s when funny munny out of thin air entered the realm of normalcy; new normalcy where the financial system is concerned.
I assume that the ‘tool’ known as yield curve control (per this article) is part of MMT (Modern Monetary Theory) TMM (Total Market Manipulation) that the eggheads promote with not an ounce of historical monetary grounding, caution or even human-like soul. They are monetary Humanoids, AKA bureaucrats, AKA economic Ph.Ds with more statistical and theoretical knowledge than common sense. They released the FOMC minutes and policy micro-managers offer their interpretations.
Read full article... Read full article...
Tuesday, February 25, 2020
US Bond Market Yield Curve Patterns – What To Expect In 2020 / Interest-Rates / Inverted Yield Curve
By: Chris_Vermeulen
Quite a bit of information can be gleaned from the US Treasury Yield Curve charts. There are two very interesting components that we identified from the Yield Curve charts below. First, the bottom in late 2018 was a very important price bottom in the US markets. That low presented a very deep bottom in the Yield Curve 30Y-10Y chart. We believe this bottom set up a very dynamic shift in the capital markets that present the current risk factor throughout must of the rest of the world. Second, this same December 2018 price bottom set up a very unique consolidation pattern on the 10Y-3Y Yield Curve chart. This pattern has been seen before, in late 1997-1998 and late 2005-2008.
The reality of these two patterns setting up in the Yield Curve charts suggests that the US and global markets are going to experience a surge in volatility and a very real potential that the US and global markets will contract over the next 6 to 24 months. Within about 3 to 6+ months of these patterns setting up, one of two separate outcomes typically takes place.
Read full article... Read full article...
Monday, October 07, 2019
Yield Curve Inversion Current State / Interest-Rates / Inverted Yield Curve
By: Nadeem_Walayat
An inverted yield curve is basically when the yield on 2 year US government bond exceeds the 10 year US bond yield as worried investors opt to disinvest from risky assets in favour of safer longer term government bonds thus driving down long bond yields below that of nearer term bonds. And the closer the yield curve gets towards towards an inversion the greater the likelihood for a future recession. So far the yield curve inversion has successfully forecast the last 3 economic downturns in the United States. Though the YCI has proved less reliable elsewhere, especially for Australia.
Read full article... Read full article...
Thursday, August 01, 2019
US Yield Curve Inverted Months Earlier than Most Think / Interest-Rates / Inverted Yield Curve
By: John_Mauldin
The inverted yield curve is one of the more reliable recession indicators.
I discussed it at length last December. At that point, we had not yet seen a full inversion. Now we have, and it appears the curve was “inverted” back then, and we just didn’t know it.
The Powell Fed spent 2018 gradually raising rates and reducing the balance sheet assets it had accumulated in the QE years.
This amounted to an additional tightening. In fact, the balance sheet reduction may have had more impactthan lower rates.
Now if you assume, as Morgan Stanley does, every $200B balance sheet reduction is equivalent to another 0.25% rate increase, which I think is reasonable, then the curve effectively inverted months earlier than most now think.
Monday, June 17, 2019
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion / Interest-Rates / Inverted Yield Curve
By: Robert_Ross
The markets are in the middle of a once-in-a-decade event.
And it says a lot about what you should do with your money right now.
I’m talking about a critical recession indicator called the yield curve inversion—or the Diamond Cross.
As you may recall, a Diamond Cross happens when the difference between the yield on the 10-year Treasury note and the 3-month Treasury bill is negative. This is a telltale sign that the economy is slowing.
The Diamond Cross popped up briefly in March, only to return on May 15. Last week, it was the steepest, or most severe it’s been since April 2007.
Tuesday, April 02, 2019
Inverted Yield Curve Fears Are Early / Interest-Rates / Inverted Yield Curve
By: John_Mauldin
Last week, the yield curve inverted for the first time since 2007. The yield for 10-year Treasuries fell below the yield for the 3-month T-Bill.
The inversion set off alarm bells and US stocks fell sharply. While concerns are reasoned, the alarm bells may be premature.
Inversion is an historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, although it’s likely.
Wednesday, March 27, 2019
Yield Curve Has Inverted. Will Gold Rally Now? / Interest-Rates / Inverted Yield Curve
By: Arkadiusz_Sieron
The yield curve followed suit of the Fed and also inverted. Inverted yield curve is a sign of an incoming recession, they say. However, what is the background of this yield inversion and how will gold react to its emerging story?
Red alert! Or, actually, a yield alert! After months of worries, the yield curve has finally inverted. Well, maybe not the whole yield curve, but one of its segment. As one can see in the chart below, the spread between US 10-year Treasury and 3-Month Treasury dived on Friday to its lowest since 2007.
Read full article... Read full article...
Tuesday, March 26, 2019
US Treasury Bond Yield Inversion and Political Fed Cycles / Interest-Rates / Inverted Yield Curve
By: Chris_Vermeulen
With so much news hitting the wires regarding the Treasury Inversion level and the “potential pending recession”, we wanted to shed a little insight into this phenomenon and what we believe the most likely outcome to be going forward. Our researchers, at Technical Traders Ltd., believe the Treasure inversion is a reactionary process to overly tight US Fed monetary policies, consumer demand factors and outside cycle forces. There is very little correlation to inverted Treasury levels and causation factors other than the US Fed and global central banks. We believe consumers and consumer sentiment also play a role in setting up the conditions that prompt yield inversion. The one aspect we believe everyone fails to consider is the uncertainty that is associated with major US election cycles.
The US Fed is obviously a driving force with regards to yields and consumer expectations. In the past, the US Fed has rotated FFR levels up and down by enormous amounts (in some cases 200 to 500%+ over very short spans of time. Consumers, you know those people, the ones that are the actual driving force of the local and state level economies, have been the the ones having to deal with wildly rotating FFR levels and the consequences of their debt rotating from 4~7% average interest rates to 8~25%+ average interest rates over the span of just a few years.
Read full article... Read full article...
Sunday, March 03, 2019
Yield Curve Inversion and the Stock Market 2019 / Stock-Markets / Inverted Yield Curve
By: Nadeem_Walayat
Yield Curve Inversion
An inverted yield curve is basically when the yield on 2 year US government bond exceeds the 10 year US bond yield as worried investors opt to disinvest from risky assets in favour of safer longer term government bonds thus driving down long bond yields below that of nearer term bonds. And the closer the yield curve gets towards towards an inversion the greater the likelihood for a future recession. So far the yield curve inversion has successfully forecast the last 3 economic downturns in the United States. Though the YCI has proved less reliable elsewhere, especially for Australia.
Read full article... Read full article...
Saturday, December 15, 2018
Market Confusion About the Yield Curve Inversion / Interest-Rates / Inverted Yield Curve
By: Donald_W_Dony
Last week, the 5-year Treasury note fell below the 2-year note causing many market watchers to suggest the US Yield Curve is inverting. And as the Curve is a leading indicator to the stock market, the bears came out in force declaring the party has ended.
Nothing could be further from the truth.
The more important yield comparison to watch is the 2-year Treasury note versus the 10-year note.
Read full article... Read full article...
Wednesday, December 05, 2018
Yield Curve Harbinger of Stock Market Doom / Stock-Markets / Inverted Yield Curve
By: Gary_Tanashian
“The Harbinger of Doom”? Of course we (well, the media) are talking about the yield curve AKA Amigo #3 of our 3 happy-go-lucky riders of the macro. I have annoyed you repeatedly with this imagery in order to show that three important macro factors needed to finish riding before situation turns decidedly negative.
Amigo 1: SPX (or stocks in general)/Gold Ratio
Amigo 2: 30 Year Treasury Yield
Amigo 3: Yield Curve
Read full article... Read full article...
Tuesday, April 10, 2007
The US Economy: Is Manufacturing and the Yield Curve Signalling Recession? / Economics / Inverted Yield Curve
By: Gerard_Jackson
The US yield curve is giving a lot of economic commentators the jitters. The rule is that whenever the yield curve goes negative, i.e., short-term interest rates exceed long-term interest rates, a recession emerges some 12 to 18 months later. There was a great deal of hand-wringing in late 2005 when the yield turned negative. Recently the curve has started to flatten, with some commentators now predicting that it will once again go positive and give the US economy another spurt of growth.
The odd thing here is that the economic commentariat do not seem to realize that in a truly free market the yield curve would always tend to be flat. If a difference between long-term and short-term rates emerged then arbitrage would eliminate the difference. Say, for instance, short-term rates began to rise, then investors would desert long-term rates in favour of short-term rates. This would see short-term rates fall and long-term rates rise until the curve was flat.
Read full article... Read full article...
Saturday, March 31, 2007
Draw the Yield Curve, Then Plot the Data / Interest-Rates / Inverted Yield Curve
By: John_Mauldin
This week we look at something which has far more potential to hurt the economy than subprime loans - the US Congress. We muse on inflation data and why the economy may do better than I think.
Let's start with a question from reader Dr. Rick Simon Associate Professor of Mathematics of the University of La Verne. After some very nice comments, he threw in the zinger:
"That said, however, you've gone far into the 'draw the curve, then plot the data' mentality this time. It wasn't enough to 'spin' the data the way you want it; for example, by citing only the Fed's Moskow and ignoring Bernanke and others. You actually state, 'Fewer buyers and those losing their homes will mean more rentals. That means rent prices will go up.' Please do explain how more rentals on the market will cause rent prices to go up."
Read full article... Read full article...
Monday, March 19, 2007
The Inverted Yield Curve - Is It Really Different This Time? / Interest-Rates / Inverted Yield Curve
By: Paul_L_Kasriel
One of the components of the index of Leading Economic Indicators is the spread between the 10-year nominal Treasury yield and the federal funds rate (hereafter referred to as "the spread"). When the spread is widening, it is thought to be a harbinger of faster future real economic growth; when the spread is narrowing, it is thought to be a harbinger of slower future real economic growth. When the spread becomes negative, or the yield curve inverts, a necessary condition of a recession occurs.
That is, every recession starting with the one in 1970 has been preceded by a negative yield spread (See Chart 1, in which the shaded vertical areas represent recessions). However, there has been one occasion since the recession of 1970 when the yield spread turned negative and a recession did not occur. That was in the summer of 1998 at the time of the Long-Term Capital Markets arbitrage fund meltdown. The pace of economic activity slowed at this time and the Federal Reserve quickly dropped the fed funds rate by 75 basis points, perhaps forestalling a recession.
Read full article... Read full article...
Friday, March 16, 2007
The Inverted US Yield Curve - Is It Really Different This Time ? / Interest-Rates / Inverted Yield Curve
By: Paul_L_Kasriel
One of the components of the index of Leading Economic Indicators is the spread between the 10-year nominal Treasury yield and the federal funds rate (hereafter referred to as “the spread”). When the spread is widening, it is thought to be a harbinger of faster future real economic growth; when the spread is narrowing, it is thought to be a harbinger of slower future real economic growth. When the spread becomes negative, or the yield curve inverts, a necessary condition of a recession occurs. That is, every recession starting with the one in 1970 has been preceded by a negative yield spread (See Chart 1, in which the shaded vertical areas represent recessions).
However, there has been one occasion since the recession of 1970 when the yield spread turned negative and a recession did not occur. That was in the summer of 1998 at the time of the Long-Term Capital Markets arbitrage fund meltdown. The pace of economic activity slowed at this time and the Federal Reserve quickly dropped the fed funds rate by 75 basis points, perhaps forestalling a recession.
Read full article... Read full article...