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yield curve graphical view?
Old 07-22-2018, 11:21 AM   #1
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yield curve graphical view?

There are a lot of talks about yield curve

Is there a graphical view to see how long term yield and short term yield converging and ready to be inverted?

I found this below though not sure how to interpret it.
https://www.bondsupermart.com/main/m...d-curves-chart
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Old 07-22-2018, 04:43 PM   #2
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Once you click to see the chart for US, you can see the slope from 2 to 30 yrs is not as steep today vs 1 yr ago. The short end has moved up quite a bit but the longest term has hardly moved at all. This is not inverted but if the trend continues it could be. If you go back to the Singapore yield curve, you’ll see the slope of the curve has not changed much from 1 yr ago.
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Old 07-22-2018, 05:20 PM   #3
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The following link is to a chart, kept current by the St. Louis Federal Reserve, that shows the difference between 2 and 10 year Treasury bonds over time.

https://fred.stlouisfed.org/series/T10Y2Y
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Old 07-22-2018, 05:23 PM   #4
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The MarketWatch page on the 10 year Treasury has a nice interactive yield curve graphic if you scroll down a bit. It compares against a year ago. https://www.marketwatch.com/investin...countrycode=bx

I’ve seen the curve much flatter than this. And inverted too. As narrow as the spread is, we’re not there yet.
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Old 07-22-2018, 06:46 PM   #5
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Quote:
Originally Posted by gromit View Post
The following link is to a chart, kept current by the St. Louis Federal Reserve, that shows the difference between 2 and 10 year Treasury bonds over time.

https://fred.stlouisfed.org/series/T10Y2Y
I like this one. Slide the start date slider left and watch the gray shaded areas appear (recessions). Note what happens just prior to those.
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Old 07-23-2018, 07:23 PM   #6
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The scales on the x and y axes in the original post detract from the picture and message.

Change the y-axis to be from 0% to 5% or 0% to 10% and also change the x-axis so that it is scaled appropriately for the differences in time. In the link provided in the original post, the x-axis shows all the years with even spacing an that is clearly inappropriate. The key message is that the differential for taking on a significantly longer duration is not given much compensation for the added risk.

This one is a somewhat better representation doing a better job conveying the message.

YieldCurve.com - Market Yield Curves
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Old 07-23-2018, 07:54 PM   #7
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I like this one. Slide the start date slider left and watch the gray shaded areas appear (recessions). Note what happens just prior to those.
Interesting.getting uncomfortably close to that line.
Then again, I changed nothing I was doing and sailed right through the last two periods when it went below the line.
This time the economy seems to be in good shape and getting stronger, from what i see at least. Although talking heads go on about stocks being overvalued, they have been saying so since about 2010.
Perhaps it will be different this time.
I still plan to change nothing and
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Old 07-23-2018, 11:41 PM   #8
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The yield curve actually steepened today and I believe it steepened on Thursday or Friday last week. Not that two days makes a trend or anything like that, but I was surprised that our journey toward inversion is not monotonic. If it is not monotonic then it also may not be inexorable.

But yeah,
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Old 07-24-2018, 06:53 AM   #9
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I like this one. If you hit the 'animate' button just below the chart, it runs along over the past 18 years.
Dynamic Yield Curve | Free Charts | StockCharts.com

But, IIRC, a flat curve indicates a possible recession 12 months or so out, not immediately. IFAIK, it's not an infallible indicator and other inputs need to be considered.

Personally, I have no plan to change anything at this time--or later; IMO that's why one diversifies.
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Old 07-24-2018, 07:09 AM   #10
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I asked this question over on bogleheads:

If you knew for sure that a recession would happen in the next 18 months, what would you do about it?

Crickets. Not much you can do about it. Rudder amidships, steady as she goes.
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Old 07-24-2018, 08:18 AM   #11
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The yield curve actually steepened today and I believe it steepened on Thursday or Friday last week. Not that two days makes a trend or anything like that, but I was surprised that our journey toward inversion is not monotonic. If it is not monotonic then it also may not be inexorable.

But yeah,
Of course it’s not monotonic. The recent dip down at the long end was a response to trade “war” concerns. There are other pressures pushing up long rates. The degree of various influences change from day to day.
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Old 07-24-2018, 08:25 AM   #12
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I asked this question over on bogleheads:

If you knew for sure that a recession would happen in the next 18 months, what would you do about it?

Crickets. Not much you can do about it. Rudder amidships, steady as she goes.
Load up on bonds?

Sure there is plenty you can do about it. Something perhaps not to be stated on boggleheads.

The problem is no one knows when, or how bad, or what will happen in the meantime, and that’s the real reason for “steady as she goes”.
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Old 07-24-2018, 09:23 AM   #13
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OP, Do these responses address your concerns?
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Old 07-24-2018, 09:39 AM   #14
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The problem is no one knows when, or how bad, or what will happen in the meantime, and that’s the real reason for “steady as she goes”.
+1

Add to that, the history of yield curve and recessions forecasting does not include any instance of Central Bank QE, which must have an impact - but one that cannot be forecast.
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Old 07-24-2018, 10:54 AM   #15
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+1

Add to that, the history of yield curve and recessions forecasting does not include any instance of Central Bank QE, which must have an impact - but one that cannot be forecast.
Right, and the QE unwind could create all sorts of surprises.
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Old 07-24-2018, 11:06 AM   #16
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QE unwind + GDP growth + inflation = something is going to happen.
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Old 07-24-2018, 02:50 PM   #17
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QE unwind + GDP growth + inflation = something is going to happen.
Seems like it. We are at full employment, which pressures corporate profits as well as contributing a bit to inflation. Inflation has finally caught up to the Fed target and while not overly high, doesn't seem like will pull back to under 2% any time soon. The QE unwind continues at a rate of $40 to $50B a month. Just hard to understand why the long end of the curve wouldn't creep back up.

From what I read - what's keeping the long end of the bond market down is the global bond market. There is a lot of demand for US long bonds now which are paying higher interest rates. When the ECB and Japan pull back on their negative interest rate policies, the US long bond rates could change quickly.
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