Bond Interest Rate Inversion

[justoneman]

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]

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]

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]

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]

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]

There’s too much speculation in the market anymore to actually correlate things correctly.

 

[Exquisitor]

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?

Opposite.

 

[Lord Tammerlain]

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]

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]

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.

 

[Lord Tammerlain]

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]

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]

That's not true.

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

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]

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.