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USA Yield Curve Nearly Flat... Recession Looms?

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Economy

https://www.google.ca/amp/s/www.cnbc.com/amp/2018/09/21/us-bonds-and-fixed-income-fresh-economic-data-due.html

 

A flattening yield curve as previously discussed tends to signal that the business cycle is near its end and a Recession typically follows. The only time this was ever wrong was in 1966 when an inverted yield curve (worse than flat yield curve) turned out to give a false alarm. Every other recession was accurately forecasted with a flat yield curve

 

US 2 year debt bonds are trading at 2.813% while 10 year bonds are at 3.074% less than a 20 basis point difference the lowest since August 2007

 

This signals that investors do not demand much higher rates for long term debt as they believe interest rates will fall soon and it's better to lock into long term rates even if there's barely a premium for it

 

It also makes it less desirable for lenders such as banks to lend if their long term loans pay back little more than what they must borrow short term to lend often affecting credit availability

Edited by Economy
jesse_batista
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kyanewest

Well an episode of the simpsons with Trump presidency predicted an economic crash so I believe it

Simpsons_screenshot.png?itok=2R0aioLK

Always trust The Simpsons

Dr Dre don't just stand there, operate!
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Economy
19 minutes ago, ShockPop said:

Sometimes Trump = turd.

I fail to see the connection :oprah:

jesse_batista

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Rumours1977

Yep, the yield curve right now is SO ****ing scary. Some of my friends who have graduated work in Public Finance have been expressing concern for a while now. We are overdue for a recession, though. Let’s just hope that when (not if) it happens, it will be far less severe than 07-08. 

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Economy
3 minutes ago, Rumours1977 said:

Yep, the yield curve right now is SO ****ing scary. Some of my friends who have graduated work in Public Finance have been expressing concern for a while now. We are overdue for a recession, though. Let’s just hope that when (not if) it happens, it will be far less severe than 07-08. 

I think the overall imbalances this time around like consumer debt and housing market are less severe than in 2007 (exept maybe the stock market valuations) 

 

But the issue is we got less amunition to fight one this time around as fiscal and monetary policy has been exhausted

Edited by Economy
jesse_batista
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Born2BeBrave
1 minute ago, Economy said:

I think the overall imbalances this time around are less severe than in 2007 (exept maybe the stock market) 

 

But the issue is we got less amunition to fight one this time around as fiscal and monetary policy has been exhausted

By exhausted you mean the wealth being controlled by a select 3 percent of the country. 

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Economy
2 minutes ago, Born2BeBrave said:

By exhausted you mean the wealth being controlled by a select 3 percent of the country. 

That's not exactly what I was referring to

 

Income inequality is a serious issue but it's a different issue to what I was referring to

jesse_batista

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Rumours1977
5 minutes ago, Economy said:

I think the overall imbalances this time around are less severe than in 2007 (exept maybe the stock market) 

 

But the issue is we got less amunition to fight one this time around as fiscal and monetary policy has been exhausted

Don’t even get me started on the prolonged dovish nature by the Federal Reserve. 

3 minutes ago, Born2BeBrave said:

By exhausted you mean the wealth being controlled by a select 3 percent of the country. 

In terms of monetary policy, I believe he is referring to the Fed’s behavior (Federal Funds Rate, etc.). It’s why (in my opinion) a lot of the supposed growth that occurred during the Obama was bs (in terms of magnitude). 

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Economy
7 minutes ago, Rumours1977 said:

Don’t even get me started on the prolonged dovish nature by the Federal Reserve. 

In terms of monetary policy, I believe he is referring to the Fed’s behavior (Federal Funds Rate, etc.). It’s why (in my opinion) a lot of the supposed growth that occurred during the Obama was bs (in terms of magnitude). 

I was. The fact that rates were so low and so long. I'm also refering to the quantitative easing. It leaves little room for cuts now

 

Tho Interestingly now, Canada and the US are the only major economies that have started raising rates. No one else has in the major economy world

 

It's still too low tho to make a difference if we had a recession now and had to cut rates tho

 

Here in Canada our housing market and consumer debt is even more imbalanced than the US in 2007 :/

 

Edited by Economy
jesse_batista
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Woolfsmck
1 hour ago, Economy said:

I think the overall imbalances this time around like consumer debt and housing market are less severe than in 2007 (exept maybe the stock market valuations) 

 

But the issue is we got less amunition to fight one this time around as fiscal and monetary policy has been exhausted

Also, New bank regulations regarding capital to debt ratio will lessen the chance of a credit panic, which all short term lending between banks stops.

The probably of a soft landing and restart when trade issues are solved is pretty good imho...

Edited by Woolfsmck
like a cat in a sil, I watch life, moving&still, proceed across my face, I leave no trace.My words give a clue,look inside to see whats true

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Rumours1977
1 hour ago, Economy said:

It's still too low tho to make a difference if we had a recession now and had to cut rates tho

Yep. That’s why prolonged quantitative easing can be such a detrimental choice. I’m hoping the recessionary pressures take a little longer to hit just so the rates will be as high as possible when it happens. However, the Fed’s current plan for rates hikes would mean that the recession would have to hit pretty far in the future for the Fed to have sufficient power (in terms of rate adjustments) to make much of a difference imo. 

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Economy
1 hour ago, Rumours1977 said:

Yep. That’s why prolonged quantitative easing can be such a detrimental choice. I’m hoping the recessionary pressures take a little longer to hit just so the rates will be as high as possible when it happens. However, the Fed’s current plan for rates hikes would mean that the recession would have to hit pretty far in the future for the Fed to have sufficient power (in terms of rate adjustments) to make much of a difference imo. 

Yeah. And I don't see it coming any later than 2020 latest

 

At least it doesn't look like the recession would be as severe as the last one. But less amunition to fight it could mean it will once again be prolonged :/

 

In North America at least our monetary policy in going in the right direction

 

In the EU, UK, Japan etc its not budging and stuck at near 0%. I'm not certain about China but I think they've also been lowering it last few years but at least theirs still has room to drop

jesse_batista
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Economy
1 hour ago, Woolfsmck said:

Also, New bank regulations regarding capital to debt ratio will lessen the chance of a credit panic, which all short term lending between banks stops.

The probably of a soft landing and restart when trade issues are solved is pretty good imho...

Agreed that fundamentally the housing market, consumer finances and other major eccesses like new cars on road etc are not at the level of 2006/2007 that lead to a huge crash (although very high stock valuations are a concern)

 

But in the flip side recessions usually get a helping hand from lower rates or stimulus to help fight it and prevent a downward spiral from going too far

 

This time around rates can't go much lower since they are still so low and most governments are too broke for any significant fiscal stimulus. So on that end hands are a little tied

jesse_batista
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Chuckles

I wish I could understand what y'all are discussing :huntyga: Is there somewhere I can read about this?

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