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08-14-2019, 07:47 AM
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#1
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tmrpots
Join Date: Jun 2008
Posts: 2,285
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2yr/10yr Treasuries Inverted for First Time in 12 Years
Markets are taking it kinda hard right now. (S&P down 39).
Last edited by barn32; 08-14-2019 at 07:48 AM.
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08-14-2019, 08:42 AM
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#2
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PA Steward
Join Date: Mar 2001
Location: Del Boca Vista
Posts: 88,543
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Have you acted because of this news (that was talked about yesterday on the front page of CNBC in the midst of the strong rally)? Just curious.
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08-14-2019, 08:56 AM
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#3
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Registered User
Join Date: Apr 2014
Location: Northwest Indiana
Posts: 67
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I've been in UBT since Aug 1
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08-14-2019, 11:32 AM
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#4
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tmrpots
Join Date: Jun 2008
Posts: 2,285
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Quote:
Originally Posted by PaceAdvantage
Have you acted because of this news (that was talked about yesterday on the front page of CNBC in the midst of the strong rally)? Just curious.
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Recessions happen. If there is one on the horizon a year or so out, to me, that's the normal course of events. Will it happen? I have no idea. I find these inverted curves interesting facts. Are they predictive? Have been in the past, but who knows going forward. Two things are a given: 1. Markets overreact. 2. Short-term rates higher than long term rates is abnormal. It just doesn't make sense, at least to me.
That being said, I'm a day trader. I no longer try and predict what the markets are going to do. Been proven wrong too many times. (Been right many times, but bad timing.) Instead, I try (as best I can) to react appropriately to what the markets are already doing.
That approach has helped a lot. Quite a lot.
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08-14-2019, 05:08 PM
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#5
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Registered User
Join Date: Feb 2003
Location: NE Ohio
Posts: 16,487
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Quote:
Originally Posted by barn32
Recessions happen. If there is one on the horizon a year or so out, to me, that's the normal course of events. Will it happen? I have no idea. I find these inverted curves interesting facts. Are they predictive? Have been in the past, but who knows going forward. Two things are a given: 1. Markets overreact. 2. Short-term rates higher than long term rates is abnormal. It just doesn't make sense, at least to me.
That being said, I'm a day trader. I no longer try and predict what the markets are going to do. Been proven wrong too many times. (Been right many times, but bad timing.) Instead, I try (as best I can) to react appropriately to what the markets are already doing.
That approach has helped a lot. Quite a lot.
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Recessions are almost always preceeded by an inverted yield curve. But an inverted yield curve, in and of itself, does not mean mean a recession is imminent. Correlation but not causation.
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08-14-2019, 08:42 PM
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#6
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Registered User
Join Date: Feb 2010
Posts: 1,458
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Quote:
Originally Posted by Valuist
Recessions are almost always preceeded by an inverted yield curve. But an inverted yield curve, in and of itself, does not mean mean a recession is imminent. Correlation but not causation.
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Its something like 1-2 years later on average right? People seem to think once we invert we go straight down which isn't exactly accurate.
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08-15-2019, 11:11 AM
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#7
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Registered User
Join Date: Jun 2009
Posts: 14,568
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Why now?
I was reading about the yield inversion 6 weeks ago.
Why did it only hit the market yesterday?
https://www.npr.org/2019/06/30/73747...ntent=20190630
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08-15-2019, 11:47 AM
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#8
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Registered User
Join Date: Sep 2007
Location: Boston+Ocala
Posts: 23,740
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i am waiting for a deep haircut in the equity markets and will be buying IBM and MSFT if they get hit. i like those 2 because they are basically software company's that deal in data, (the cloud). and that is where i think it's at going forward.
those 2 stocks will account for 50% of my portfolio, the other 50% is already being insured by physical gold.
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08-15-2019, 12:15 PM
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#9
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tmrpots
Join Date: Jun 2008
Posts: 2,285
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Quote:
Originally Posted by horses4courses
I was reading about the yield inversion 6 weeks ago.
Why did it only hit the market yesterday?
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What you're referring to is the 3mo/10yr inversion, which happened around the time you state, and has been inverted for some time now.
The 2yr/10yr just occurred and is fluctuating back and forth. Currently, it is not inverted.
BTW, yesterday, the 30yr bond fell below 2% for the first time ever.
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08-15-2019, 12:20 PM
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#10
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tmrpots
Join Date: Jun 2008
Posts: 2,285
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Quote:
Originally Posted by lamboguy
i am waiting for a deep haircut in the equity markets and will be buying IBM and MSFT if they get hit. i like those 2 because they are basically software company's that deal in data, (the cloud). and that is where i think it's at going forward.
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Amazon has a large cloud presence as well.
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08-15-2019, 12:58 PM
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#11
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Registered User
Join Date: May 2010
Posts: 5,005
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So much talk about the "inverted yield curve." If I didn't know any better, I'd think it was a kind of ED or maybe something like Peyronie's disease! Guess it's only the economy that needs Viagra.
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08-15-2019, 01:57 PM
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#12
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Registered User
Join Date: Jan 2010
Posts: 2,176
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Quote:
Originally Posted by barn32
What you're referring to is the 3mo/10yr inversion, which happened around the time you state, and has been inverted for some time now.
The 2yr/10yr just occurred and is fluctuating back and forth. Currently, it is not inverted.
BTW, yesterday, the 30yr bond fell below 2% for the first time ever.
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Date ------1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr --10 Yr 20 Yr 30 Yr
08/01/19 2.11 2.14 2.07 2.04 1.88 1.73 1.67 1.68 1.77 1.90 2.21 2.44
08/02/19 2.11 2.12 2.06 2.02 1.85 1.72 1.67 1.66 1.75 1.86 2.16 2.39
08/05/19 2.07 2.08 2.05 1.99 1.78 1.59 1.55 1.55 1.63 1.75 2.07 2.30
08/06/19 2.05 2.08 2.05 2.00 1.80 1.60 1.54 1.53 1.62 1.73 2.03 2.25
08/07/19 2.02 2.04 2.02 1.95 1.75 1.59 1.51 1.52 1.60 1.71 2.01 2.22
08/08/19 2.09 2.07 2.02 1.96 1.79 1.62 1.54 1.54 1.62 1.72 2.02 2.25
08/09/19 2.05 2.06 2.00 1.95 1.78 1.63 1.58 1.57 1.65 1.74 2.03 2.26
08/12/19 2.09 2.06 2.00 1.94 1.75 1.58 1.51 1.49 1.56 1.65 1.92 2.14
08/13/19 2.05 2.04 2.00 1.96 1.86 1.66 1.60 1.57 1.62 1.68 1.94 2.15
08/14/19 1.98 1.98 1.96 1.92 1.79 1.58 1.53 1.51 1.55 1.59 1.84 2.03
Wednesday Aug 14, 2019 -Chart is From the www.treasury.gov
The 2yr. is still less than 10 yr. so not inverted. It did go inverted for a matter of a few minutes yesterday. Media over-reaction.
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One of the downsides of the Internet is that it allows like-minded people to form communities, and sometimes those communities are stupid.
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08-16-2019, 02:42 PM
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#13
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Veteran
Join Date: Mar 2009
Posts: 9,893
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There have been seven recessions since 1962. If you examine the 10-year yield less the 3-month T-bill yield, you will note an inversion roughly 18 months (usually closer) prior to every actual recession. The 10s/3-month inversion provided a false signal once: 1965 (a recession didn't follow until about five years later). Currently this metric is inverted by 29 bps (0.29%). This time could be different. We'll see.
How could Fed funds at 2.25% cause a recession? Over the past few years, Fed funds have increased by over four percentage points.* In 1981, total debt** to GDP was roughly 160%. That number is now just shy of 350%. Adjusting for leverage, the Fed has hiked rates eight percentage points in 1981 terms, not 4 percentage points. This exercise oversimplifies things, given government debt has grown at a much quicker pace than consumer/corporate debt, but it's the easiest way to appreciate the fragility of today's levered economy.
*Atlanta Fed estimates the low in Fed funds was around a negative 2%, adjusted for QE
**govt/consumer/corp debt
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08-16-2019, 04:52 PM
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#14
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Registered User
Join Date: Jan 2010
Posts: 2,176
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Quote:
Originally Posted by Saratoga_Mike
There have been seven recessions since 1962. If you examine the 10-year yield less the 3-month T-bill yield, you will note an inversion roughly 18 months (usually closer) prior to every actual recession. The 10s/3-month inversion provided a false signal once: 1965 (a recession didn't follow until about five years later). Currently this metric is inverted by 29 bps (0.29%). This time could be different. We'll see.
How could Fed funds at 2.25% cause a recession? Over the past few years, Fed funds have increased by over four percentage points.* In 1981, total debt** to GDP was roughly 160%. That number is now just shy of 350%. Adjusting for leverage, the Fed has hiked rates eight percentage points in 1981 terms, not 4 percentage points. This exercise oversimplifies things, given government debt has grown at a much quicker pace than consumer/corporate debt, but it's the easiest way to appreciate the fragility of today's levered economy.
*Atlanta Fed estimates the low in Fed funds was around a negative 2%, adjusted for QE
**govt/consumer/corp debt
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This guy has an interesting take on the yield curves and recession.
__________________
One of the downsides of the Internet is that it allows like-minded people to form communities, and sometimes those communities are stupid.
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08-27-2019, 10:22 AM
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#15
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tmrpots
Join Date: Jun 2008
Posts: 2,285
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The 2yr/10yr are now inverted by 3 bps. And the 3mo/30yr just inverted as well by a little over 1 bps.
Last edited by barn32; 08-27-2019 at 10:24 AM.
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