Curve Watchers Anonymous has been watching the yield curve flatten for months on end.
The flattening is taking shape in an unusual manner, with yields at the long end of the curve generally declining and yields at the short end of the curve rising.
Treasury Yields 2000-2017
That chart is as of the end-of-day on September 20 following the interest rate and balance sheet reduction announcement by the FOMC.
The curve flattened again today. The above pattern is quite unusual. In most prior recessions, the curve flattened with short-end yields rising faster than long-end yields, not with the long end declining substantially for months.
I can find one similar pattern heading into the 2001 recession. It’s difficult to spot in the above chart because the curve in 2000 is inverted.
Treasury Yields 2000-2001
The flattening of the curve looks quite recessionary.
Mike “Mish” Shedlock
LET’S DO IT!
…
There’s something very important I forgot to tell you.
What?
Don’t cross the streams.
Why?
It would be bad.
I’m fuzzy on the whole good/bad thing. What do you mean, “bad”?
Try to imagine all life as you know it stopping instantaneously and every molecule in your body exploding at the speed of light.
…
…
I have a radical idea. The door swings both ways, we could reverse the polarity flow through the gate.
How?
[hesitates] We’ll cross the streams.
‘Scuse me Egon? You said crossing the streams was bad!
Cross the streams…
You’re gonna endanger us, you’re gonna endanger our client – the nice lady, WHO PAID US IN ADVANCE, before she became a dog…
Not necessarily. There’s definitely a VERY SLIM chance we’ll survive.
[pause while they consider this]
[slaps Ray] I love this plan! I’m excited it could work! LET’S DO IT!
http://www.imdb.com/title/tt0087332/quotes
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And on October 1st…
The QE Unwind starts!
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This is silly. There is no recession, there is only perceived normalcy…like stock pricing rising forever.
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I have been watching this too. There is only one explanation. The FED is at odds with the market. The market sees only black clouds in the future, hence long end rates falling, which the FED is blinded by soft sunlight. This is what happens when a central bank is caught between a soft economy and a hard speculative place.
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…Or the outgoing Fed is afraid whomever Trump, appoints ro replace them, will uncritically underwrite even more printing than even they feel comfortable with. And want to complicate the upcoming free-for-all printfest at least a little bit before they leave
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These figures maybe distorted due to all the fed interventions. I am not sure normal parameters can be useful at this point. There are no signs of recession here in MI, just labor shortages along with wage inflation. Something does not compute
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– If you want to know whether or not the US economy is in recession or not then look what happens to the change in debt. If that is shrinking then the US is in recession.
Source: Steve Keen.
– The yeild curve is NOT a recession indicator !!!
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Ridiculous
The yield curve is an excellent indicator
Is it perfect? Nothing is?
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Of course, the entire yield curve for sovereign debt, being inherently risk-free, should be NEGATIVE to avoid welfare proportional to account balance rather than need with the shortest maturity sovereign debt, demand account balances at the central bank (aka “reserves” in the case of commercial banks, credit unions, etc.), costing the most (most negative interest).
Hint: Welfare for the banks and the rich should be eliminated FIRST, don’t you know, since that’s the cause for so many others NEEDING welfare.
He who oppresses the poor to make more for himself Or who gives to the rich, will only come to poverty. Proverbs 22:16
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8 years ago the economic data was systemactically manipulated (cooked)to produce the gov’t narrative “recovery”and after 9 years of “recovery” what prey tell will make big gov’t change the narrative?Like china’s “permanent”6/7 annual gdp print,USSA will be on a “permanent recovery”,that’s right sheeple 10-15 shoot 20 years of “recovery”
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Historically an inverted yield curve was a sign of impending recession, but since the worlds CBs started printing by the trillions, any signal from the shape of the yield curve is completely distorted from reality.
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“In fact, the collapse to just 91bps places the yield curve right at the start of the last two recessions…So no–you do not have to invert the yield curve to see a recession…In fact we are already there.” (ZeroHedge—Yield Curve Flashes Recession Warning in Collapse to 10 Year Lows)
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If bond yields were being set by open markets, this story would be relevant.
Because bond yields are so heavily manipulated by the Fed, the signals it is sending are about politics, not economics. One more thing Bernanke and Yellen screwed up.
We may or may not be headed into a recession — many of us don’t believe Obama’s credit card binge was a recovery in the first place. But if a new/resumed recession is upon us, it has nothing to do with Janet Yellen’s yield manipulation
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maybe the kicked can is finally landing
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The problem is a lot of things have looked “quite recessionary” for about 8.5 years now.
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The pundits have called 25 of the last 2 recessions these last 17 years. Is this number 26?
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If the stats are arbitrary, then the outcome is as well.
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Here is a list of various things were have heard were going to crash the market let’s say since the end of the last recession in June 2009. But still NOTHING.
-starting in July of 2009 talk of a “double dip” recession
-Gold was supposed to go to $5,000 an ounce
-subprime auto loan bubble
-robots and AI causing unemployment
-hyperinflation due to central banks
-China hard landing (has been “any day” now for 6 years)
-Canadian housing bubble (I have heard for almost 20 yrs now about Vancouvers housing bubble imminent collapse!)
-Ebola outbreak
-EU sovereign debt contagion after Greece (Italy, Spain, Portugal, Ireland, etc..) … (getting freaking OLD waiting for this to happen!)
-unemployment numbers are “fake” due to low labor participation rate and only low wage jobs being created
-millennials living at home and only finding low wage jobs
-mass muni defaults and underfeeding of pensions (getting OLD waiting for this…having been hearing about it for at least a decade now – so far has been a big NOTHING BURGER)
-SS & medicare are “ticking time bombs” (I’ve heard this one for 20 yrs now – don’t know one person yet who didn’t get 100% of their SS & medicare)
-student loan debt bubble (never seems to impact the economy negatively)
-USA real estate is in a “echo bubble”
-too much Gov’t debt will restrict growth
-war with North Korea
-Amazon putting retailers out of business
…..I’m tired of waiting! When is any of this perma bear sh*t going to blow???? Why have us perma bears been wrong for sooooooo long now?
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Wait, are you a perma bear gold bug who has given up the faith? That could be the signal.
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Oh jeez….the old “its a sign of a top” line. Never heard that one before.
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Well that’s because they started QE….. I’d say that was pretty hard to predict. That’s why there wasn’t any pain. The can was kicked down the road.
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