View Full Version : As the Yield Curve Flattens

02-09-2005, 07:30 AM
Bond Yields (http://bonds.yahoo.com/rates.html)

The spread from 2-10 yr treasurys was 72 basis points at the close yesterday. One year ago the same spread was around 235 basis points. The 30 year is now yielding 4.36%. The 10 yr hasn't cracked 4% for awhile now so we'll see. The Fed is on a course to bring short term rates somewhere higher than 3%, some say higher than 4%. Is a yield curve inversion in the offing? I can't see how economic growth in the U.S. will be all that strong given the shape of the yield curve but certainly do your own due dilligence. The U.S. $ seems to be showing a little strength in here. All in all FWIW I'm not that enthusiastic about equity prices as the indicators I use are at best neutral and at worst say SELL.

02-14-2005, 10:09 PM
Adios - What does the humped or flat yield curve mean for interest rates in the future? Does it mean that lowering demand for long term bonds means rates will decrease in the future?

02-15-2005, 06:29 PM
More or less it means that short term rates are rising faster than long term rates which means the Fed is in a tightening mode which means expect slower economic growth especially if the yield curve inverts. In the case of the long end of the yield curve the 30 year has rallied and the 10 yr has rallied from it's lows of 2003 and IMO is locked in a trading range. An economist I respect stated that he believes the Fed will not be as aggressive as most think in their tightening FWIW.