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Two-Year Treasury Yield Highest Since 2007, Everything Inverted Over 1 Year

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11 comments on Two-Year Treasury Yield Highest Since 2007, Everything Inverted Over 1 Year

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Yield Curve to Scale

The yield curve chart above is easy to read and understand. The curve from 1 year through 7 years is inverted with the long end of the curve.

The curve has been inverted in places for over a year. This is a recession signal and I believe the economy went into recession in May. 

The Fed is merrily hiking away and is likely to keep doing so until it breaks something big time. The Fed will hike 75 basis points tomorrow and the market thinks another 75 basis points is coming in November. 

If so, it is doubtful the markets will like it much. 

Housing Starts Unexpectedly Soar In August as Housing Permits Crash

Earlier today I noted Housing Starts Unexpectedly Soar In August as Housing Permits Crash

The bond market reaction was as if the report was residential construction report was strong. It wasn’t. The GDPNow model reacted the way I thought it would.

For discussion, please see GDPNow Forecast for 2022 Q3 Barely Positive Following Housing Starts Report.

This post originated at MishTalk.Com

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worleyeoe
worleyeoe
1 year ago
“The Fed is merrily” hiking away and is likely to keep doing so until it breaks something big time.”
Correct! It’s called inflation! Who on earth thinks a measly 3.25% FFR by the end of the day is going to break 8+% inflation?
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Maximus_Minimus
Maximus_Minimus
1 year ago
The central banks are hiking rates, but the banks don’t follow suit with their saving account or even term deposit rates. I would expect the saving accounts pay higher rates than the central bank’s rate, as was always the case.
What does it say? The banks are flush with printed money, and don’t want your deposits?
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worleyeoe
worleyeoe
1 year ago
Reply to  Maximus_Minimus
Put some of your extra money in brokered CDs with Fidelity. Just make sure you choose call protected CDs and hold until maturity. 3 year CDs are now offering 4% return. Once the FFR hits 3.5-3.75% before the end of the year, they’ll be pushing close to 5%. With a possible terminal rate of 4.5-4.75% next year, we might be looking at upwards of 6% return. And if the Fed has to take the FFR up close to 5%, the stock market is most assuredly be in steady decline as the FFR pushes higher.
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Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  worleyeoe
I am buying CDs if the maturity is right for me.
The question is more or less rhetorical. I guess, I know the answer: the most dysfunctional financial system in history.
That’s why we need war to distract the sheep.
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vanderlyn
vanderlyn
1 year ago
i will re iterate, i believe this analysis misses the whole point of the FED. they were birthed for one thing and one thing only. to keep their owners, the bankers who birthed them, in high cotton. powell broadcasted this rate hiking plan like never before. to warn the rich men of the world to do what they must. i took him serious and sold all my properties. the FED only exists to prop up her owners. the NYC banks. it’s a great scam. they have folks believing in so many other things. the FEDRESNY is privately owned. where all the printing and doling out of bailouts and free money happens. the DC fed is for show and to give the image of quasi government reporting. i believe mish and many here have missed the whole reason for their existence. go read, “creature from jekyll island” for an easy primer. or any thorough history book. the FED is NOT dumb. it’s a big and great scam. and once you understand this, making dough trading off the scam becomes easier. great blog. i love the real estate analysis. the fed stuff seems way too naive, though. like what i believed in my school daze………
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Zardoz
Zardoz
1 year ago
Keep ‘em coming! Interest on my savings accounts almost covers my living expenses now!
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8dots
8dots
1 year ago
Gail Tverberg chart show how solar energy clog CA energy pipeline, every day between 6AM and 6PM. Only one parameter survive the
mini strokes ==> nuke. Mini nukes will rise > the sun. If a nuclear cloud reach the Kursk Odesa will pay the price. Kalinka
is a Trojan Horse.
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StukiMoi
StukiMoi
1 year ago
“The Fed is merrily hiking away and is likely to keep doing so until it breaks something big time.”
The more they “break” the better. All the way up until well past outstanding credit dipping below what it was before The Fed’s funding. With the rest liquidated. That’s a long way to go, before any “breaking” will have net negative consequences.
“If so, it is doubtful the markets will like it much.”
With regards to loot: The less burglars “like” some action, the better. Universally.
Neither America, nor anywhere else, benefits from pure, systemic, universal looting of productive people and productive assets, by nothing but a gaggle of half literate, connected debasement thief beneficiaries. It doesn’t somehow become any less destructive, simply by dressing the looting up in newspeakian playing office and calling it “markets.”
Up until, at least, beyond the above 1910 outstanding credit baseline, all and any liquidation resulting from “tightening” will be beneficial. Factories won’t disappear, corn won’t stop growing, houses won’t fall down, knowledge learned, nor connections formed won’t be lost. Ergo: any activity which creates value independent of the current “system”of nothing but pervasive looting, will quickly be up and running again. Only without all those involved in doing something productive having to hand over most-to-more-than-all of their earnings to keep clueless, simpleton burglars playing office alive, flush and in splendor.
So, the more of today’s undifferentiated, zero redeeming value, theft rackets which get so called “broken,” the better off pretty much everyone not directly benefitting from being handed masses of pure loot, will be.
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Jojo
Jojo
1 year ago
Putin just announced mobilization of his reserves. That is likely going to throw a wrench into world markets, methinks.
Poor guys going to be cannon fodder for Putin’s folly.
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Scooot
Scooot
1 year ago
Reply to  Jojo
Just heard one of his spokesmen on BBC Radio 4 talking up the risk of a full scale Nuclear war and directly threatening London.
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Nuddernoitall
Nuddernoitall
1 year ago
Yes, Futures for the early November Fed hike has increased to 75 basis points. We’re still six weeks away from the November hike and the current Futures gap (between 75 BPT and 50 BPT) can be tightened, and perhaps reversed, in the 6-week timeframe. I hope it is, because if the Fed does raise another 75 in November, they will break something.
I’ll stick with my earlier guess for “only” a 50 pt hike, in November —but I admit the Futures FED rate play of 75 for November has me on alert.
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