Bob Brinker Free Discussion Site 59,820+: Inverted Yield Curve?

» Kirk - Inverted Yield Curve?

In response to Bulls over Bulls Plus Bears - Free Chart posted by Normxxx:

jamesj24: With an inverted yield curve, and it is indeed inverted, not flat as Bernake, and now the media is alleging, a recession is inevitable.

Normxxx: I believe the yield on the 3-month bills is still a few basis points below the yield on the 30-year bonds! (But, hey, this time it's different anyway; Greenspan and Bernanke said so.)

This is what Bloomberg is showing:

<img width=490 height=250 src=http://quote.bloomberg.com/apps/chart?ty...>

3-Month 4.54%
6-Month 4.68%
2-Year 4.67%
3-Year 4.64%
5-Year 4.56%
10-Year 4.55%
30-Year 4.52%

If I had to guess, I’d say the Bond market is expecting short term rates to go higher in the short term then go lower when the Fed stops raising rates after they figure out it was too late and the economy is slowing.

The trouble is the bond market is not any better and perhaps worse than predicting the economy than the stock market. If you went by the stock market, back in March of 2000 it was saying the next few years would be wonderful and we all know that didn’t turn out to be true!

FWIW, there is an article at the Federal Reserve that says a 0.5% inversion of the yield curve is something like a 25% chance of a recession... project that back to what we have now and the odds are quite low, still, that we go into recession. Slower growth is a given, but a recession is still low in the probability distribution.

-- posted by Kirk