Basis Point Spreads
- 3-month to 1-year: 36
- 1-year to 2-year: 23
- 2-year to 3-year: 15:
- 3-year to 5-year: 19
- 5-year to 10-year: 16
- 1–year to 30-year: 32
If the fed hikes twice more this year, with the one-year yield at 2.11 and the 3-month yield at 1.75, there is little room for anything but inversion or a nearly flat curve if rates on the long end fail to rise.
For discussion of the long bong trend, and Lacy Hunt’s law of diminishing returns, please see Relentless Yield Curve Flattening.
Mike “Mish” Shedlock
Why is the Fed destroying the economy?
Because the “smart money” understands that short rates won’t be going much higher before we are into the next recession and then there will be a “grab for yield” – ANY yield – and there likely won’t be any. So best to grab it now and have a potential capital gain later also.
I’m in for the “long bong trend”. The “Relentless Yield Curve Flattening” also means a relentless bid for long-dated treasuries. Any thoughts on why?
The bond market sees the oncoming recession just beyond the horizon and is signalling “FED POLICY ERROR”.