• 177 days Will The ECB Continue To Hike Rates?
  • 177 days Forbes: Aramco Remains Largest Company In The Middle East
  • 179 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 579 days Could Crypto Overtake Traditional Investment?
  • 584 days Americans Still Quitting Jobs At Record Pace
  • 586 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 589 days Is The Dollar Too Strong?
  • 589 days Big Tech Disappoints Investors on Earnings Calls
  • 590 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 592 days China Is Quietly Trying To Distance Itself From Russia
  • 592 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 596 days Crypto Investors Won Big In 2021
  • 596 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 597 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 599 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 600 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 603 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 604 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 604 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 606 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Are You Minding the Curves? Sweet Spot is Likely Not Where You Think

Curve Watcher's Anonymous has its eye on the yield curve again.

Over the course of the last year, and except for the close front-end, US treasury yields have risen across the board, and in some cases dramatically. This is what one would expect from a tapering Fed that is also discussing rate hikes.

However, the action is the last three months is not what one would expect.

Treasury Yields

In the past year, 5-year treasuries have been hit the hardest (sharpest yield increase). That is not what one might expect from a strong recovery. And certainly a drop in the 30-year long bond is not what one would typically expect either.

Typically, when the Fed start hiking or announces intention to hike, the long end of the curve changes the most. It did, until the beginning of the year. The following charts will help put things in perspective.


Yield Curve as of 2014-03-28 Monthly

Yield Curve as of 2014-03-28 Monthly

The above chart shows monthly "closes" where the yield was at the end of the month. The current month shows the present value.


Yield Curve as of 2014-03-28 Weekly

Yield Curve as of 2014-03-28 Weekly

The above chart shows weekly "closes" where the yield was at the end of each week. The current week shows the present value.

Symbols

  • $TYX: 30-Year Green
  • $TNX: 10-Year Orange
  • $FVX: 05-Year Blue
  • $IEX: 03-Month Brown

Since the beginning of the year, the middle and long portion of yield curve has flattened dramatically.

The "sweet spot" for investors has been the long end of the curve. Those hiding in 5-year treasuries have been hit the hardest.

Given the Fed is holding the low end of the curve near zero, the typical inversion one sees in the yield curve preceding a recession is not going to happen. We could see the 5-10 spread invert but that would take some doing.

Regardless, this flattening of the curve is certainly not a sign of a strong recovery. Given blatant Fed yield curve manipulation, this may be as close to a recession warning that we get.

 

Back to homepage

Leave a comment

Leave a comment