Fogdog
Well-Known Member
Yep, yield curve inversion between long term and short term interest rates is still with us and it's still being touted as a sign of imminent recession.
An analyst who wrote an article on this subject (cited in the link below) posted a chart showing the difference between 10 year federal bond interest rate and short term fed funds rate over the past few months:
When long-term rates are lower than short-term rates, the yield curve is "inverted," which is a signal that has preceded recessions in the past with remarkable accuracy. Last Thursday, investors shifted the yield curve much further into inversion territory than we have seen since the last recession. I think worries about the trade war are mostly to blame.
Link to Investopedia article
Why the yield curve inverts is difficult to explain, but one reason could be that investors aren't worried about inflation because they think future growth will be low. This is one of the most common explanations you will hear from analysts discussing the yield curve in the news. Another factor that can drive the yield curve into negative territory is if the Fed is expected to lower the short-term interest rate target. Bond investors will buy long-term bonds to keep the average yield within their portfolio high, which ironically raises the price of those bonds and lowers the yield preemptively.
Tesla
@ray4tesla
