• 47 mins UK Credit Card Interest Rates Are Skyrocketing
  • 18 hours From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 23 hours Are Smart TVs Spying On Us?
  • 1 day Is Fossil Fuel Divestment A Waste Of Time?
  • 2 days A Russian Billionaire’s Space Quest To Save Humanity
  • 2 days Markets Take Breather As Consolidation Continues
  • 2 days Economic Woes Weigh On Copper Prices
  • 2 days World's Largest IPO At Risk Following Drone Strikes
  • 3 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 3 days What’s Behind The Silver Sell-Off?
  • 3 days The Retail Apocalypse Is Accelerating
  • 3 days The Top Tech Stocks Of The Year
  • 4 days America’s Workforce Elderly Workforce To Double By 2028
  • 4 days Toyota Tests Solar-Powered Prius
  • 5 days Why The Gold Rally Flatlined
  • 5 days The Uranium Sector Can’t Catch A Break
  • 6 days Upcoming Fed Meeting Has Investors On Edge
  • 6 days Global Gold Sector Outlines Responsible Mining Principles
  • 7 days China’s Giant Vampire Fund Loses $120B
  • 7 days McDonalds To Roll Out Robot Drive-Thru Clerks
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Two Important Points on the Yield Curve and Spreads

In my post this morning on Yield Curve and Spreads: Fed's Real Policy Error in Pictures; What's Next? there were two important points I intended to make but didn't. First here's a repeat of two charts.


Yield Curve 1998-2015 (Year-End Values)

Yield Curve 1998-2015 - Year End Values
Larger Image

Values for 2015 are from the December 16 close, the day the Fed hiked.

Yield Curve Differentials 1998-2015 (Year-End Values)

Yield Curve Differentials 1998-2015 - Year End Values
Larger Image


Two Important Points

  1. The tightening of the yield curve so early in the lead-up and initial stage of Fed rate hikes is both unprecedented and recessionary-looking.

  2. It's highly likely that tightening reflects bond market concerns about a slowing economy and various economic bubbles that are about to pop.

If the economy was strengthening as widely believed, the yield curve ought to be widening, not collapsing.

Greenspan's first hike in four years was on 2004-06-30. Check out the yield curve and differentials ahead of and right after that hike. Compare to today.

Those who believe the yield curve must invert before a recession hits, need think about those two important points in addition to taking a look at recession in Japan.

A recession without a preceding yield curve inversion has not happened in the US before, but neither have yield spread differentials collapsed in the initial stages of a Fed tightening cycle.

 

Back to homepage

Leave a comment

Leave a comment