US Treasury Yields 1-Year to 30-Years
The 30-year long bond set a new record low end-of-day yield of 1.94% in late August.
Yields then went on a tear, with the 30-year scorching up to 2.37%. In that time, the yield curve remained strongly inverted throughout. Note the 1-year yield (pink line) was higher than the 10-year yield (orange line) through early October.
It was not until early November that the yield curve mostly uninverted. Only two small inversions remain now as shown in the lead chart.
US Treasury Yields 2000 – 2019-11-19
The larger picture shows not much has changed. Bounces in yields come and go.
Attitudes, however, have changed. People have written off the recession because of steepening of the yield curve.
Rate Cut Odds
The financial markets have written off interest rate cuts by the Fed all the way until June of 2020.
Day of Reckoning
As part of the amazing complacency, Fed Chair Jerome Powell Says “Day of Reckoning” Far Off
Color me skeptical.
Note that GDP Estimates Crashed on Dismal Economic Reports.
And in particular, Freight Volumes Negative YoY for 11th Straight Month, sounding a strong recession warning.
Mike “Mish” Shedlock
has the predictive damage been done already? It was inverted for more than 10 days….
Is the forward guidance and yield curve manipulation equivalent to the soviet 5-year plan? Curious minds want to know.
The Large Scale Asset Purchase / QE (oh, that’s right. Not QE) targeted the short end yield curve … of course, that would steepen the curve. For now.
Monetizing the debt….
…..There we find that very same T-bill [$4 billion] with the CUSIP 912796WL9 showing up as having been purchased by the Fed Nov 5, 2019 — the very date of its issuance….
via link to peakprosperity.com
More monetization ahead. It is baked into the system now and no one has to be told.
“Does it really matter if a big bank sits ever-so-briefly between the Fed and the Treasury debt it buys?
Maybe to a trial lawyer seeking to get a guilty client off on a technicality. But this certainly doesn’t qualify as “old” paper.”
…
Uh, yes it does. For starters it blows up your whole story.
Really now, no one expects the Justice Department Marshals showing up at Powell’s doorstep, Tony. It just shows how close hand-to-mouth is getting.
Who could pass up a juicy 1.5% ?
Economically, it’s irrelevant. Or heck, even worse: True to progressive form, the idiots manage to perform even debt monetization inefficiently these days.
I suppose, the FED directly monetizing treasury debt is to prevent government spending like a drunken sailor. Given the current debt curve, it doesn’t really work. This is uncharted territory, so everything goes.
A very gradual but steady economic uptrend seems to me to be ideal.
I have a feeling things are just getting started.
I don’t think this is the end. I don’t think we are even at the end of the beginning with crazy monetary policy. Credit is the ultimate moral hazard. It always leads to printing the second moral hazard.
Mish, I think you remember the Euro saga with Greece. Chicken little and the end is near type thing. I should have bought Greek bonds but I thought you were right on the money.
What makes anyone think all the sudden central bankers or going so say “ Well we failed. Let’s do nothing now.”? I think Mr. Powell understand what he has at his disposal.
“People have written off the recession because of steepening of the yield curve.”
The Fed has switched gears from reverse to forward, meaning they’re adding more (or subtracting less) liquidity. This may delay the recession and, more likely, the stock market falling. We will probably have to see some other economies and markets crash before the US does, especially as the investors in other countries embark on a “flight to quality” here, first.
The Fed is not going to tell us for at least 2 years, which bank/banks are getting the repo money either. Dodd Frank guaranteed the continual bailouts (or bail ins) without further congressional approval.
Exactly. The banking system itself is an extension of the government. This is no longer the pre-crisis banking system or the one we had in the 1990s that had some independence.