Inverted yield curve

[jj1929]

In the US, inverted yield curve, if any, can predict recession.
Now can the inverted yield curves in Australia and UK predict anything?

http://www.bloomberg.com/markets/rates/australia.html
http://www.bloomberg.com/markets/rates/uk.html

 

[doctorj]

... and if so, what do you make of the US yield curve?

And the TED spread seems to be coming back a bit?

 

[jj1929]

Based on TED, I think it is safe to buy when it is below 0.5 and sell when it is above 1.

 

[doctorj]

Where'd you get that TED chart?

 

[jj1929]

I got the data from the following and used Excel to plot the data.
http://www.federalreserve.gov/releases/h15/data.htm

 

[blaze87]

http://www.bloomberg.com/markets/rates/australia.html

Since inverted yield curve is a rather accurate predicter of future economic reccession for the US, will it also apply for AUS?

currently AUS has a rather (negative) flat-invertish yield curve. What does ASFers thinks of this inverted yield curve? Can china-india save us from this inverted yield curve?

blaze

 

[blaze87]

i was wondering if any more asfers have more opinion abt this inverted yield curve

blaze

 

[Smurf1976]

I am seeing a few real life signs that the economy is slowing which fits with the inverted yield curve. "Quiet" is a term I'm hearing more of in response to the "how's business" type of question. That's just a few anecdotals however.

As for more theoretical points, if it works in the US (as it does) then I can't see why it wouldn't work reasonably well in Australia. It's always been my understanding that whilst not foolproof, it's a reasonably reliable indicator of forward conditons in any developed contry unless there's some unforeseen shock (eg bank goes bust, natural disaster, major oil discovery etc).

 

[sptrawler]

I wonder if this negative bond yield, is going to be the way the World 'washes away' all the quantitative easing money, that was printed?

https://www.abc.net.au/news/2019-08...urve-time-for-negative-yielding-debt/11425960

 

[greggles]

Insiders are selling stock like it's 2007

New York (CNN Business) The leaders of Corporate America are cashing in their chips as doubts grow about the sustainability of the longest bull market in American history.

Corporate insiders have sold an average of $600 million of stock per day in August, according to TrimTabs Investment Research, which tracks stock market liquidity.

August is on track to be the fifth month of the year in which insider selling tops $10 billion. The only other times that has happened was 2006 and 2007, the period before the last bear market in stocks, TrimTabs said.

Investors often view insider buying and selling — transactions performed by top executives, leading shareholders and directors — as a signal of confidence. Even though the stock market is much larger than it was in 2007, so the $10 billion mark may not mean as much now as it did then, the acceleration of insiders heading for the exits could indicate concern about the challenges ahead, especially as the US-China trade war threatens to set off a recession.

"It signals a lack of confidence," said Winston Chua, an analyst at TrimTabs. "When insiders sell, it's a sign they believe valuations are high and it's a good time to be outside the market."

https://www.cnn.com/2019/08/26/investing/stock-market-insider-selling/index.html

If CEOs and corporate insiders believe it's time to start taking money off the table, then it might be wise to give the idea some serious consideration.

 

[Dona Ferentes]

Here's Johnny.

Bond investors are increasingly worried the US is heading for recession, casting doubt on the Federal Reserve ability to bring about a soft landing as it marches towards faster and higher interest rates to rein in inflation.

The US yield curve has inverted, based on the 10-year and three- / five-year bond yields, where the longer dated bond now yields less than the shorter dated ones. Should the closely watched 2-year bond rate exceed the 10 year, that would qualify as a classic recessionary indicator

The three-year and 10-year spread has shrunk by about 61 basis points since the start of the year.

at 01 March:

• 2 -year yield : US 1.42% ; Australia 1.08%
• 5 -year yield : US 1.71% ; Australia 1.82%
• 10 year yield: US 1.83% ; Australia 2.13% ; Germany 0.13%

and at end of trade, 23 March

• 2 -year yield : US 2.10% ; Australia 1.53%
• 5 -year yield : US 2.31% ; Australia 2.47%
• 10 year yield: US 2.28% ; Australia 2.77% ; Germany 0.46%

Under normal circumstances, the yield curve is not inverted since debt with longer maturities typically carry higher interest rates than nearer-term ones. From an economic perspective, an inverted yield curve is a noteworthy and uncommon event because it suggests that the near-term is riskier than the long term.

 

[divs4ever]

now the confounding issue here are 'massaged ' inflation ( CPI ) numbers , extraordinary QE and injected liquidity

i suggest many Western economies are already in 'recession ' with some already in a local depression ( and that is my theory on why the 2019 yield curve inversion signal SEEMED to be a miss .. and being distracted by a virus hysteria probably took some focus off the actual economy )

but i will not be returning to bonds ( , bills and notes ) for a fair while , as all debt relies on credibility ( trust ) and Cyprus basically broke that in me

 

[Dona Ferentes]

and two days later

• 2-year yield: US 2.28% ; Australia 1.55%
• 5-year yield: US 2.56% ; Australia 2.49%
• 10-year yield: US 2.48% ; Australia 2.77% ; Germany 0.58%

Houston, you've got a problem. Economists are saying they now expect the Fed to lift its key rate in multiple 50-basis-point increments.

 

[dyna]

This weekend's AFR says 20% of the stocks in the Russel 2,000 index are effectively "zombie " companies, unlikely to survive the Fed's interest rate rises. Impossible for them to pay their debts.

 

[divs4ever]

Houston, you've got a problem. Economists are saying they now expect the Fed to lift its key rate in multiple 50-basis-point increments.

well now the Fed is ( allegedly ) stopping buying them , Russia will not be buying them , and China is less likely to buy more ( some wonder if they will dump what they have or just let them mature and not bother re-buying )

 

[divs4ever]

This weekend's AFR says 20% of the stocks in the Russel 2,000 index are effectively "zombie " companies, unlikely to survive the Fed's interest rate rises. Impossible for them to pay their debts.

sadly that might be a little conservative , especially when some used that acquired debt to buy-back shares ( not invest in future growth )

 

[wayneL]

So, mug traders sitting around in their underwear got the IR trend more right than central bankers and professional economists.

Or are they just liars and narrative builders so-as not the frighten the proles at the wrong time?

Not sure which myself.

 

[divs4ever]

considering how some central bankers have over-used 'jaw-boning ' to steer the economy ( and sentiment ) and the usual trend in investing is to rush to bonds in times of uncertainty and economic stress , so creating fear MIGHT be part of their sales strategy

 

[Knobby22]

I saw on Alan Kohler the inversion now occurring at 2 years. Anyone got latest graph?

Short rise in interest rates short term followed by reducing rates. As I said months back, I can't see much of an interest rate rise occurring.

Supply shocks do not make high interest rates in the modern USA as ordinary workers cannot achieve wage rises due to almost total control of Capital over Labour in that country.

If ordinary people can't earn more then consumer items including food can't get higher prices without losing volume.

Higher costs won't translate to high inflation as in the world of the ordinary person they will just live on less. This causes a recession.

 

[KevinBB]

These are the latest figures on US and Australian interest rates, from Bloomberg.

The US 5 and 10 year are inverted, but not by much. All other relationships are normal. Source: this page

The Australian bond rates are normal. Source: this page

Its all media hype at the moment. There is no need to panic, just yet.

KH