Inverted yield curve

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Dream of Freedom
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Inverted yield curve

Post by Dream of Freedom » Thu Dec 06, 2018 1:59 pm

:o The spread between the 2 and 10 year treasuries is just 0.11% right now. Do you think we will have an inverted yield curve soon?

https://ycharts.com/indicators/210_year ... eld_spread

2Birds1Stone
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Re: Inverted yield curve

Post by 2Birds1Stone » Thu Dec 06, 2018 2:05 pm

It's possible.

The rest of 2018 will get uglier. I can't see 2019 being much better as the velocity of degradation increases.

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Re: Inverted yield curve

Post by jacob » Thu Dec 06, 2018 2:08 pm

The spread was ~0.3% when the Fed rate was 1.75-2.00% and it's 0.11% as it's 2.00-2.25% and believed to go to 2.25-2.50% shortly. A couple of more hikes are expected in 2019. The real question is what can heavily indebted debtors (like the ARMs and the US government) afford to refinance at? At this magnitude of money, it's not like the sellers won't come down to meet the desperate borrowers in order to keep them alive for a while longer.

The Gundlach reference that the Fed are going to keep hiking until (paraphrased) "onething" breaks makes a lot of sense to me. I see a lot more "stupid" being perpetrated now (compared to two years ago)... borrowing to invest---doing a carry trade between cheap junk debt and expensive junk equity because the latter always goes up. I can see why the Fed would want to build powder while at the same time discouraging more greater fool approaches. It solves two problems at the same time.

Augustus
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Re: Inverted yield curve

Post by Augustus » Thu Dec 06, 2018 7:34 pm

I just read about 1.6 trillion in corporate debt that needs to be refinanced in the next 3 years, anyone placing bets on what happens then?

Gilberto de Piento
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Re: Inverted yield curve

Post by Gilberto de Piento » Fri Dec 07, 2018 10:12 am

Another sign pointing to a possible recession. Anyone getting nervous yet? Or are you excited, hoping to buy assets on sale? Personally, If the market tanks or moves sideways for a long time it may be difficult for me to be as excited about investing.

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Re: Inverted yield curve

Post by 2Birds1Stone » Fri Dec 07, 2018 10:15 am

Eh, with the current plan of only working FT for a handful of years.......I would prefer a sharp drop and slow rise back to new highs =P

Sitting on 33% of my NW in Liquid CD's/MM funds and grabbing the popcorn for now.

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Re: Inverted yield curve

Post by Augustus » Fri Dec 07, 2018 1:10 pm

Gilberto de Piento wrote:
Fri Dec 07, 2018 10:12 am
Another sign pointing to a possible recession. Anyone getting nervous yet? Or are you excited, hoping to buy assets on sale? Personally, If the market tanks or moves sideways for a long time it may be difficult for me to be as excited about investing.
I'm looking to buy a house in a very overpriced area in the next 2-3 years, I'll probably buy regardless just to lock something in (I hate moving, and that seems to be a constant with rentals), but I am really hoping I can wait out the insanity and get a deal.

That said, who knows? Debt is at record highs everywhere I look, so it seems like someone is going to have to pay the piper at some point, especially with interest rates rising. I am very curious what the interest rates are going to do to the real estate market. By my reasoning, anyone who bought a house with a minimal down payment in the last 3 years is now underwater or will be soon as interest rates continue to rise. So it may be that they all just stay put and are stuck for the next 10 years, or it may be that jobs contract and they start losing them. Could also be that people start walking away at some point just from being demoralized that they are underwater? I don't know. I knew a few people who walked away from houses they were underwater in during the last crash, because they hated being stuck, even though if they had waited 10 years they would have been okay.

I am also curious if the real estate market is still warped from the last bubble. I wonder if a larger percentage of home owners are going to stay in their homes for the long term which would decrease supply instead of swapping them out more often. It seems like anyone who bought in the 70s-early 2000s did extremely well in real estate because interest rates were crazy high then dropped, and the trend was that they traded up using their gains every so often. My generation is on the flip side of that, interest rates will either remain stable/low or go up, because they can't go any lower than they have been. I don't foresee wages skyrocketing in the next 10-20 years either. Maybe real estate is a losing game in the long term right now?

Mister Imperceptible
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Re: Inverted yield curve

Post by Mister Imperceptible » Fri Dec 07, 2018 5:17 pm

Real estate is definitely warped. I do not think it is necessarily a losing game if you wait a few years before buying. The steady-as-she-goes upward housing market is over- long live the boom/bust cycles.

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Re: Inverted yield curve

Post by Gilberto de Piento » Fri Dec 07, 2018 8:26 pm

It seems like it depends a lot in the local market too.

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Re: Inverted yield curve

Post by Peanut » Sat Dec 08, 2018 5:35 am

Local market definitely a primary factor but I read an article about RE prices having reached a point where a lot of buyers are just not having it anymore so now especially a lot of properties in high COL areas are just sitting there. I see this in my area. Prices plateaued in 2014 but some realtors haven’t gotten the message yet.


Some say we’re already in a bear market and don’t know it yet. I like trading volatile markets but am approaching with caution lest I get caught on the way down.

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Re: Inverted yield curve

Post by 2Birds1Stone » Sat Dec 08, 2018 6:18 am

Houses here are still selling over listing price in a matter of days.

Mister Imperceptible
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Re: Inverted yield curve

Post by Mister Imperceptible » Thu Mar 21, 2019 9:23 am

The Fed stops hiking rates as expected, but also takes all but one rate hike off the table thru 2021, and announces QT will end in September.

The 1-month T-bill now pays more interest than the 7-year Treasury note.

https://www.treasury.gov/resource-cente ... &year=2019

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Dream of Freedom
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Re: Inverted yield curve

Post by Dream of Freedom » Thu Apr 18, 2019 4:51 pm

Canada has an inverted yield curve too. https://www.youtube.com/watch?v=zMdNtlC0XQE

In other news people are hypothesizing that we will have a melt up (where people panic into the market not wanting to miss it). https://www.youtube.com/watch?v=o2jU3g0iIXM https://seekingalpha.com/article/425518 ... ear-market

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Re: Inverted yield curve

Post by unemployable » Wed Aug 14, 2019 1:47 pm

We made it, everyone!

2Birds1Stone
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Re: Inverted yield curve

Post by 2Birds1Stone » Wed Aug 14, 2019 4:03 pm

*The end is near*

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Re: Inverted yield curve

Post by Dream of Freedom » Thu Aug 15, 2019 9:06 am

Former fed chairman Yellen and Greenspan weigh in on yield curve. We haven't heard from helicopter Ben yet.

Historically, it has been a pretty good signal of recession, and I think that's when markets pay attention to it, but I would really urge that on this occasion it may be a less good signal," "The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields.
-Yellen
There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower," "There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.
-Greenspan

https://news.google.com/articles/CAIiEL ... id=US%3Aen

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Dream of Freedom
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Re: Inverted yield curve

Post by Dream of Freedom » Thu Aug 22, 2019 8:16 am

Famed economist Mohamed El-Erian on the U.S. yield curve being distorted by European negative yields and the biggest risk to the economy being a self fulfilling prophecy:

https://www.youtube.com/watch?v=MzKLs8l9UPM

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Re: Inverted yield curve

Post by unemployable » Thu Aug 22, 2019 8:46 am

I've always thought recessions were self-fulfilling prophecies. And this is the most anticipated recession in history. But then when the herd thinks one thing...

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