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economy

US Recession Nearly Guaranteed According To Yield Curve

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Economy

https://www.google.ca/amp/s/www.dailysabah.com/economy/2018/08/21/economists-worried-a-recession-underway-for-us-economy/amp

 

A flattening yield curve has predicted every recession with the exception of 1966 meaning it is not a completely infallible recession forecasters but about the closest to it that exists

 

For a while now the curve on long term rates has been flattening in relation to short term rates which means the market is not expecting rates to keep going up and that is usually due to not expect much more economic growth

 

If an inverted yield curve happens (so far it hasn't) its even worse (where long term rates are lower than short term ones) and means severe downturn is likely coming

 

Inverted yield curves happen when investors expect rates to drop so much that they prefer to lock in a lower rate over a longer term than accept a higher short term rate now that once refinanced might yield them nothing

Edited by Economy
jesse_batista

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MJHolland

Interesting indeed. Will be watching the bond market closely. With Trump set out to relentlessly overheat the economy, I'm glad we've at least got a pretty hawkish Fed uninterested with unemployment for the moment.

Will the yield curve change on these bonds if, say, the Fed continues to increase/or decrease interest rates? (continue to invert, reverse inversion, or no change?) 

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Economy
12 minutes ago, MJHolland said:

Interesting indeed. Will be watching the bond market closely. With Trump set out to relentlessly overheat the economy, I'm glad we've at least got a pretty hawkish Fed uninterested with unemployment for the moment.

Will the yield curve change on these bonds if, say, the Fed continues to increase/or decrease interest rates? (continue to invert, reverse inversion, or no change?) 

Hikes increase all rates but short term rates more. Because it affects credit cost now. The more rates go up the lower the chances rates long term will go up higher to catch up and so long term rates start to not go up as fast if the economy isn't seen growing enough to eventually have rates above a certain level.

 

The further into an expansion, and more mature the business cycle is the flatter the curve tends to get

 

Usually by the end it's pretty close to flat. Inverted yield curve is worse but more rare

Edited by Economy
jesse_batista

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mmmmmonster

So what does this mean in stupid person speak?

boom boom cherry

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Economy
12 minutes ago, mmmmmonster said:

So what does this mean in stupid person speak?

That investors and job creators lack of confidence in longer term economic growth is showing itself in financial market patterns based on the bets they are making

Edited by Economy
jesse_batista

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