Yield Curves - Inverted, Normal, Steep (Informative, not argumentative!)

**Mike** · 06-08-2005, 09:46 AM

Keep the flaming out of this thread, please. This article contains many useful charts to help you spot the different types of yield curves. It also explains the economic conditions that exist when each type is seen and why they have a strong predictive quality. I consider this a must-read for novices (myself included :P).

http://www.smartmoney.com/onebond/in...ory=yieldcurve

The following is also something I found useful - it contains the S&P chart from 1997 - present along with a yield curve that changes as you slide along the S&P chart. This means you have at your fingertips the yield curve for ANY point in time (I think it measures ~1 week intervals)between 1997 and now. :^

http://www.stockcharts.com/charts/YieldCurve.html

Some thoughts upon closely examining the charts:
- Current yield curve is not inverted (one can certainly claim it is flattening, though).
- A good example of inversion is early 2000; the 10 year yield dropped below the 5 year yield. In September of 2000, the yields < 5 years went above the 5-30 year yields... the market dropped like a rockalmost immediatelyafter that. :shock:
- Flat(tening) yields: 1999 shows a very flat yield curve for the most part. There were also a couple of brief inversions in 1998, which happened in the fall of that year.

**coolhand** · 06-08-2005, 10:08 AM

Just some more thoughts about the current yield-curve "conundrum".

http://tinyurl.com/ahob6

**Birchtree** · 06-08-2005, 10:14 AM

Mike,

If I may. When the yield curve flattens, it tends to discourage banks from lending. And when the yield curve inverts - bank lending virtually shuts down, causing the money supply to shrink, thus crimping economic activity. The M2 is approaching negative terriority currently, I don't think AG wants to run the risk of pushing rates higher. The omnipotent market realizes this and will respond accordingly - the futures are hot this AM again - today we have follow through.

Give the economy time to absorb the rate hikes that have already taken place before boosting them further. Got that AG!

06-08-2005, 01:19 PM

Great info Mike.

New home refinancing shoot through the roof this morning.

Now solidly over 40% of all mortgages are interest only and ARMS.

Will be interesting when the 10 year goes to its historic average.

Tech bubble was replaced by Fed Inducted Housing Bubble. Housing Bubble makes the tech bubble look like a tiny bubble.

The baby will get tossed out when this one pops. :shock:

06-08-2005, 01:26 PM

coolhand wrote:

Just some more thoughts about the current yield-curve "conundrum".

http://tinyurl.com/ahob6

Cool

He (Greenspan) has really lost control.

It is like June 2000 again.

Even his fed governers controdict him now.

That never happened in the past. And first time ever Greenie has said in clear English is does not know what is going on.

To me: If the Central Banker in the world is toothless that scares me for stocks.

PEs still 20 plus and expensing of options starts next week. :shock:

Min credit card payments go from 2% to 4 or 6% July 1. :shock::shock:

Oil over 50 and gas prices creeping up again :shock::shock::shock:

Nearly 70% of the economy is based on shopping (consumer spending).

Wage growth at record lows plus the above :s

06-08-2005, 03:47 PM

Mike wrote:
http://www.smartmoney.com/onebond/in...ory=yieldcurve
http://www.stockcharts.com/charts/YieldCurve.html

coolhand wrote:
http://tinyurl.com/ahob6

Great links guys!