Some on Wall Street say the Bond Market is the smartest due to the fact that participants are only focused on repayment risk and time of that repayment. Compared to the Equity (Stocks) market were there are flows of capital, tons of complication with financials and mood swings by participants.
Given the Bond Markets high IQ status, when it speaks people listen….
Inverted Yield Curve as Bond Market Beats it Chest with a Warning
As a quick refresher, a normal yield curve will have lower rates for shorter terms and higher rates for longer…. simply because the longer the term the greater chance of a problem/stress/default …
Pardon my free hand, but it looks like this… the longer the time the greater the cost/interest rate
When the Bond Market turns upside down/inverts, it has a very good track record of predicting a R- Word!
Note on this long term chart, as the line drops below zero, the Bond Market is Beating its chest and inverting…. also note the grey area that follow are R-Words…
Using a shorter term chart, last week marked a strong inversion of about -.25% and closed the week off at -.20% note those are point 25% and point 20%…. far right below the line…
So it looks like the R Word is in the cards, not to worry we have been talking slowdown since December of 2021… so we are prepared….
Remember, Equity Markets are forward looking and will sniff out the recovery before it is seen…. Also, recall, headlines are the worst near the end…. Still a Ways to Go though!
Next up — Why the Fed is in a pickle and may only have an R- Word way out!
Have a Great “Inverted Yield Curve” Update Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Bond Market Beats its Chest … Invertedly/Upside Down Yield Curve …. R – Word Predictor (Recession)
Some on Wall Street say the Bond Market is the smartest due to the fact that participants are only focused on repayment risk and time of that repayment. Compared to the Equity (Stocks) market were there are flows of capital, tons of complication with financials and mood swings by participants.
Given the Bond Markets high IQ status, when it speaks people listen….
Inverted Yield Curve as Bond Market Beats it Chest with a Warning
As a quick refresher, a normal yield curve will have lower rates for shorter terms and higher rates for longer…. simply because the longer the term the greater chance of a problem/stress/default …
Pardon my free hand, but it looks like this… the longer the time the greater the cost/interest rate
When the Bond Market turns upside down/inverts, it has a very good track record of predicting a R- Word!
Note on this long term chart, as the line drops below zero, the Bond Market is Beating its chest and inverting…. also note the grey area that follow are R-Words…
Using a shorter term chart, last week marked a strong inversion of about -.25% and closed the week off at -.20% note those are point 25% and point 20%…. far right below the line…
So it looks like the R Word is in the cards, not to worry we have been talking slowdown since December of 2021… so we are prepared….
Remember, Equity Markets are forward looking and will sniff out the recovery before it is seen…. Also, recall, headlines are the worst near the end…. Still a Ways to Go though!
Next up — Why the Fed is in a pickle and may only have an R- Word way out!
Have a Great “Inverted Yield Curve” Update Day!
John A. Kvale CFA, CFP
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Posted in Market Comments, Investing/Financial Planning, Interest Rates, Economy, Clients/Clients Only, Forecast, FOMC
Tagged FOMC, Interest Rates, 10 Year Treasury, Yield Curve, 2 Year Treasury, Inverted, 2-10's