Posted on 07/13/2018 4:29:24 PM PDT by BenLurkin
Some market pros say that warning from the Treasury yield curve, which has long been viewed as reliable, is not as relevant as it once was because of the long years of central bank easing that has depressed interest rates and turned debt markets into far more placid arenas.
The curve has been getting flatter by the day — meaning short-end interest rates are rising faster than long-term rates, and they are growing closer together. A flattening curve is a warning about economic weakness ahead, but should the curve invert— where the short end yield, like the 2-year, is actually higher than the 10-year—that would be viewed as a very solid recession warning.
On Friday, the gap between the 2-year yield and 10-year yield narrowed to just 25.5 basis points, a new 11-year low.
“The bond market is telling us the [economic recovery] is going to end soon, so let’s price it in with certainty,” said George Goncalves, head of U.S. fixed income rate strategy at Nomura. “They might be right, but they’re too early to call the end of the business cycle. It’s more the fact that it’s flattened so low, and it’s that people are dismissive of this economic recovery…If you look at the facts, why are people jumping on this ‘recession yield curve’ bandwagon when they haven’t given the U.S. economy a chance to see how much it can run? It could show up two years later. Why price it in with such certainty?”
(Excerpt) Read more at cnbc.com ...
Translation:
NBC hopes for a depression soon so that they can blame Donald Trump.
Financial predictions are very unreliable and are not to be trusted.
1. An inverted yield predicts a recession, it doesn’t cause it.
2. We can’t repeal the economic cycle, so there IS a recession in the future.
3. The main cause of recession is that too many people end up with too much excess capital after a long expansion and when they all put it to work at the same time they outrun demand.
4. The FED doesn’t cause recessions, it just makes them worse.
IOW: The damn stock market keeps going up and we need to find a way to stop it.
How much money did they miss out on since 2010?
If I recall, the last yield curve inversion “predicted” a recession that happened nearly 3 years later. Another inversion hasn’t even happened yet, so what we have is a prediction of a predictor of an eventual recession. I’m not ready to panic.
You are correct and even a recession itself is nothing to panic over, it’s completely normal and necessary. It brings new opportunities. The only alternative to expansions and contractions following each other is a steady state economy. I know you don’t want that.
Financial journalism has gone tabloid. It’s all about clicks, and you have less than a second to catch someone passing by. “If it bleeds it leads” pertains to financial writing too, even if the bleeding is imaginary.
Election time downturn to get the Commies elected.
Now, I have been noticing that the municipal bonds are beginning to have their yields rise and the premiums over the issue price beginning to get into proper relationship.
So, will wait until the bonds yields get back into the 4 to 5 percent range.
As a side note, bond yields as well as bank interest for the past number of years has been lower than what I was getting in the early 1970's.
BS. They’re running for cover during this “trade war”.
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