inverted yield curve post-mortem

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date inverted yield curve post-mortem Mark Bole 06-01-2008  Re: inverted yield curve post-mortem Douglas Johnson 06-01-2008  Re: inverted yield curve post-mortem Elle 06-01-2008  Re: inverted yield curve post-mortem rick++ 06-02-2008
Posted by Mark Bole on June 1, 2008, 11:51 am The phrase in the subject line used to come up in this group fairly often over the last few years, I haven't seen it lately. Not having cracked open an economics textbook in decades, I'm wondering, first: are we no longer in that situation? Anecdotally, I see more bank ads these days with higher CD rates for longer terms. Second, was the inverted yield curve of the recent past truly the indicator it was thought to be (recession, or whatever)? It's been a long time since I've had to even think about putting cash in a CD with a term longer than 18 months, I'm kinda rusty... -Mark Bole -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Douglas Johnson on June 1, 2008, 3:56 pm >The phrase in the subject line used to come up in this group fairly >often over the last few years, I haven't seen it lately. > >Not having cracked open an economics textbook in decades, I'm wondering, >first: are we no longer in that situation? Anecdotally, I see more bank >ads these days with higher CD rates for longer terms. The yield curve is no longer inverted see: http://stockcharts.com/charts/yieldcurve.html > >Second, was the inverted yield curve of the recent past truly the >indicator it was thought to be (recession, or whatever)? It kind of depends on whether you think we are in a recession or not. But we are certainly in a significant slow down, so I'd say the inverted yield curve scored another prediction success. -- Doug -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Elle on June 1, 2008, 8:31 pm > The phrase in the subject line used to come up in this > group fairly often over the last few years, I haven't seen > it lately. > > Not having cracked open an economics textbook in decades, > I'm wondering, first: are we no longer in that situation? According to the following two sites, for about two months now the curve has clearly been not inverted: http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve http://www.investinginbonds.com/ Go back to March, and the curve becomes somewhat anomalous again. > Second, was the inverted yield curve of the recent past > truly the indicator it was thought to be (recession, or > whatever)? I think the theory that an inverted yield curve precedes a recession relies somewhat on numerology. Or one could say it is economics, so the rules are not hard and fast. > It's been a long time since I've had to even think about > putting cash in a CD with a term > longer than 18 months, I'm kinda rusty... The talk is that the Fed will raise rates again "soon" to try to prevent further inflation. I think I would wait until five year rates were back up to at least 5%. Or buy really short term CDs. Or do the ladder (say six-month rungs, longest, five years), since historically, the curve flattens out again beyond five years. If you can stand the risk, yields on some conservative stocks look pretty good, with many having a nice rate of increase. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by rick++ on June 2, 2008, 1:34 pm Yield curve methodology may not have been application for the past 15 years or so. The 10 and 30 year bond rates are no longer strongly affected by any actions of the US government and have been held ow over that period. Theres huge international and domestic demand for that kind of bond which keeps rates low. This despite all the sniping about the quality of the US dollar. Maybe the declining dollar and inflation will eventually force these rates up. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. 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