<mod note> Please keep the thread (and forum) free of Fed / election conspiracy theory.
I wouldn’t be too quick to label this as “fighting the fed”. The fed rate cuts will directly only effect the short maturity end of the yield curve; the longer the maturity, the more indirect the effect of the fed & the more the bond market (& its supply/demand dynamics) will control the rates. Imho, the inverted yield curve should get more consideration. I don’t see how the fed alone can directly “un-invert”. However, let’s say the bond market decides the fed cuts signal tame inflation & unemployment, translating into a need to increase rates on longer end & a more (historically) normal yield curve. That is, the bond market agreeing, not fighting the fed.Funnily enough, the day I posted this thread the 10-year began a relentless selloff, going against the fed. I guess the bond market feels that the fed cut too much too soon.
The traditional measure of an inverted yield curve is the 2 yr versus the 10 yr, which is no longer inverted.... Imho, the inverted yield curve should get more consideration. I don’t see how the fed alone can directly “un-invert”. However, let’s say the bond market decides the fed cuts signal tame inflation & unemployment, translating into a need to increase rates on longer end & a more (historically) normal yield curve. That is, the bond market agreeing, not fighting the fed.
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Correct, not every relationship point on the curve.The traditional measure of an inverted yield curve is the 2 yr versus the 10 yr, which is no longer inverted.
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10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
The 10-year minus 2-year Treasury (constant maturity) yields: Positive values may imply future growth, negative values may imply economic downturns.fred.stlouisfed.org
There are 2 camps on this -- whether 2 year or 90 day vs 10 year. Matters not to me which is traditional; doesn't affect my point. I'm too lazy to go see when the curve uninverted using the 2 yr, but I think it was reasonably close to the time of the rate cut. I'm sure someone will chime in if not.The traditional measure of an inverted yield curve is the 2 yr versus the 10 yr, which is no longer inverted.
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10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
The 10-year minus 2-year Treasury (constant maturity) yields: Positive values may imply future growth, negative values may imply economic downturns.fred.stlouisfed.org