• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Bond Interest Rate Inversion

justoneman

DP Veteran
Joined
Jan 14, 2022
Messages
6,253
Reaction score
1,432
For the first time since 2006, a short term bond is yielding a higher interest rate than a longer one. This is a major indicator of recession. The longer term bonds become garbage, those holding them lose money and they cannot sell them.
 

OrphanSlug

A sinister place...
Supporting Member
DP Veteran
Joined
Sep 24, 2011
Messages
33,867
Reaction score
34,734
Location
Atlanta
Gender
Male
Political Leaning
Independent
Generally speaking, the bond market is a shit show this year. You can pretty much chalk it all up to inflation changing the markets.
 

justoneman

DP Veteran
Joined
Jan 14, 2022
Messages
6,253
Reaction score
1,432
Generally speaking, the bond market is a shit show this year. You can pretty much chalk it all up to inflation changing the markets.
The rate of short term yields is spiking up severely in just two months. The charts look exactly like they did just before the 2007 melt down.
 

OrphanSlug

A sinister place...
Supporting Member
DP Veteran
Joined
Sep 24, 2011
Messages
33,867
Reaction score
34,734
Location
Atlanta
Gender
Male
Political Leaning
Independent
The rate of short term yields is spiking up severely in just two months. The charts look exactly like they did just before the 2007 melt down.

I agree they look the same, but the reasons are different.
 

highroller

DP Veteran
Joined
Jun 16, 2020
Messages
5,509
Reaction score
3,231
Gender
Male
Political Leaning
Moderate
For the first time since 2006, a short term bond is yielding a higher interest rate than a longer one. This is a major indicator of recession. The longer term bonds become garbage, those holding them lose money and they cannot sell them.
Wouldn’t the higher interest-rate in the short term bonds mean that people are selling their short term and buying more long-term bonds?
 

highroller

DP Veteran
Joined
Jun 16, 2020
Messages
5,509
Reaction score
3,231
Gender
Male
Political Leaning
Moderate
There’s too much speculation in the market anymore to actually correlate things correctly.
 

Lord Tammerlain

DP Veteran
Joined
Jan 25, 2010
Messages
27,050
Reaction score
13,100
Gender
Undisclosed
Political Leaning
Undisclosed
Wouldn’t the higher interest-rate in the short term bonds mean that people are selling their short term and buying more long-term bonds?

It is based on the expectations that short term fed rates are going up, which makes current short term debt less attractive to own, less profit.


Rate inversions are very strong indicators of recessions 12-18 months from the 1950's
 

highroller

DP Veteran
Joined
Jun 16, 2020
Messages
5,509
Reaction score
3,231
Gender
Male
Political Leaning
Moderate
It is based on the expectations that short term fed rates are going up, which makes current short term debt less attractive to own, less profit.


Rate inversions are very strong indicators of recessions 12-18 months from the 1950's
And because short term bonds are being sold more aggressively by the holders than long-term bonds, their interest-rate needs to go up.
 

Kushinator

I'm not-low all the time
DP Veteran
Joined
Jan 2, 2006
Messages
26,060
Reaction score
12,379
Location
Lauderdale By-The-Sea, FL
Gender
Male
Political Leaning
Independent
For the first time since 2006, a short term bond is yielding a higher interest rate than a longer one. This is a major indicator of recession. The longer term bonds become garbage, those holding them lose money and they cannot sell them.
That's not true.

In 2019, a 2 year Treasury was yielding more than a 10 year until the fed reversed policy.

fredgraph.png
 

Lord Tammerlain

DP Veteran
Joined
Jan 25, 2010
Messages
27,050
Reaction score
13,100
Gender
Undisclosed
Political Leaning
Undisclosed
And because short term bonds are being sold more aggressively by the holders than long-term bonds, their interest-rate needs to go up.
Yes they do, it usually results in less capital, and less economic activity. That causes an economic slowdown and a potential recession.
 

highroller

DP Veteran
Joined
Jun 16, 2020
Messages
5,509
Reaction score
3,231
Gender
Male
Political Leaning
Moderate
Yes they do, it usually results in less capital, and less economic activity. That causes an economic slowdown and a potential recession.
With the amount of money and speculation out there, I think we need a higher interest-rates anyways
 

justoneman

DP Veteran
Joined
Jan 14, 2022
Messages
6,253
Reaction score
1,432
That's not true.

In 2019, a 2 year Treasury was yielding more than a 10 year until the fed reversed policy.

fredgraph.png
Yes it's true the 10 year bond is now earning more than the 30 year bond. First time since 2006. The 2 year is still earning less than the 10 year but it is closing in fast.
 

Paradoxical

DP Veteran
Joined
Nov 25, 2019
Messages
55,528
Reaction score
10,615
Gender
Male
Political Leaning
Conservative
The rate of short term yields is spiking up severely in just two months. The charts look exactly like they did just before the 2007 melt down.
With the Biden/Obama team at the helm, a recession is a given. They thrive on being inept and wrong in everything they do. Batten down the hatches folks.
 
Top Bottom