Inverted Yield Curve ?

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Fat-Tailed Contagion
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Inverted Yield Curve ?

Post by Fat-Tailed Contagion »

What does it mean, if anything?

Seems like significant news not being discussed much.
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Re: Inverted Yield Curve ?

Post by exodusNH »

Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:39 am What does it mean, if anything?

Seems like significant news not being discussed much.
It means short term rates are higher than long term rates.

Anything else is guessing.
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Re: Inverted Yield Curve ?

Post by dual »

The actionable item is to shorten your fixed-income maturities.

Another actionable item is to develop strategies to get better returns on your cash holdings. David Enna at tipswatch discusses a strategy of using ladders of short term tbills instead of savings or money market accounts.

https://tipswatch.com/2022/09/21/shor ... ive-now/
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Re: Inverted Yield Curve ?

Post by Fat-Tailed Contagion »

exodusNH wrote: Thu Sep 22, 2022 10:43 am
Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:39 am What does it mean, if anything?

Seems like significant news not being discussed much.
It means short term rates are higher than long term rates.

Anything else is guessing.
Bond market is often considered "smarter" than stock market. More efficient.
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Re: Inverted Yield Curve ?

Post by exodusNH »

Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:46 am
exodusNH wrote: Thu Sep 22, 2022 10:43 am
Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:39 am What does it mean, if anything?

Seems like significant news not being discussed much.
It means short term rates are higher than long term rates.

Anything else is guessing.
Bond market is often considered "smarter" than stock market. More efficient.
The only thing that you can say definitively is that the bond market thinks that rates are going to be higher in the short term before dropping 3-5 years from now.

Anything else you read is just people trying to get you to click on a link or buy advice from.
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Re: Inverted Yield Curve ?

Post by whodidntante »

Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:46 am
exodusNH wrote: Thu Sep 22, 2022 10:43 am
Fat-Tailed Contagion wrote: Thu Sep 22, 2022 10:39 am What does it mean, if anything?

Seems like significant news not being discussed much.
It means short term rates are higher than long term rates.

Anything else is guessing.
Bond market is often considered "smarter" than stock market. More efficient.
I propose we call the unit of market efficiency the Fama.
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Re: Inverted Yield Curve ?

Post by JoMoney »

It's interesting to see on the Treasury departments " Daily Treasury Par Real Yield Curve Rates "
https://home.treasury.gov/resource-cent ... nth=202209

The 5yr rate is now even higher than the 30yr
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Re: Inverted Yield Curve ?

Post by Northern Flicker »

dual wrote: Thu Sep 22, 2022 10:45 am The actionable item is to shorten your fixed-income maturities.
If the inversion persists, it often portends (and can even cause) a recession, in which case you would have wanted to have lengthened duration. If it does not persist, it would mean that shorter rates rose less (or fell further) than longer rates. You would want to have shortened duration if the inversion does not persist.

Because there is no way to predict which outcome will come to be, there is no way to know whether shortening or lengthening duration will end up having been the preferred action.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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inverted yield curve question

Post by smooth_rough »

[Thread merged into here --admin LadyGeek]

Using historical data (post WWII), how long does inverted yield curve typically last (average length of time) ?
Last edited by smooth_rough on Fri Sep 23, 2022 10:17 am, edited 1 time in total.
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Re: inverted yield curve question

Post by vineviz »

smooth_rough wrote: Fri Sep 23, 2022 10:11 am Using historical data (post WWII), how long does inverted yield curve typically last?
Which part of the yield curve are you worried about?

Different measures will give you different answers. Could be anywhere from weeks to years.
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Re: inverted yield curve question

Post by dcabler »

smooth_rough wrote: Fri Sep 23, 2022 10:11 am Using historical data (post WWII), how long does inverted yield curve typically last (average length of time) ?
FRED site will give you this info.
https://fred.stlouisfed.org/

Cheers.
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Re: inverted yield curve question

Post by Oicuryy »

FRED's graph of 10-year minus 2-year only goes back to 1976 because their 2-year data only goes back that far.
https://fred.stlouisfed.org/series/T10Y2Y

But they have other series that go back to 1962. You could use their graph tools to show the difference between any two series.
https://fred.stlouisfed.org/searchresults?st=constant

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Re: inverted yield curve question

Post by smooth_rough »

dcabler wrote: Fri Sep 23, 2022 10:26 am
smooth_rough wrote: Fri Sep 23, 2022 10:11 am Using historical data (post WWII), how long does inverted yield curve typically last (average length of time) ?
FRED site will give you this info.
https://fred.stlouisfed.org/

Cheers.
That source looks more objective.

I found this "executive summary" that says 7 months. But it appears to have been written in 2006.

https://www.capitaladvisors.com/wp-cont ... -Curve.pdf
Last edited by smooth_rough on Fri Sep 23, 2022 10:31 am, edited 1 time in total.
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Re: Inverted Yield Curve ?

Post by LadyGeek »

I merged smooth_rough's thread into an ongoing discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: Inverted Yield Curve ?

Post by dual »

Northern Flicker
Because there is no way to predict which outcome will come to be, there is no way to know whether shortening or lengthening duration will end up having been the preferred action.
Of course there’s no way to predict with certainty but we have strong evidence. For example, the US national debt to GDP ratio is about 137%. With this large debt, the increase in rates will lead to more interest rate expense increasing the deficit which is paid for by issuing treasury debt.
Latest Fed Rate Hike Could Add $2.1 Trillion To Federal Deficit
https://sports.yahoo.com/latest-fed-ra ... 6032.html

I know that next you will trot out the Boglehead nihilist efficient market, nobody knows nothing mantra. Well we disagree. Edit. The motives of the major participants in the treasury securities markets are different from those of individual investors.
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Re: Inverted Yield Curve ?

Post by vineviz »

dual wrote: Fri Sep 23, 2022 10:56 am The motives of the major participants in the treasury securities markets are different from those of individual investors.
I see this statement trotted out every once in a while, but generally not by people who understand the motives of either individual or institutional investors.
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Re: Inverted Yield Curve ?

Post by Zanmar »

dual wrote: Thu Sep 22, 2022 10:45 am The actionable item is to shorten your fixed-income maturities.

Another actionable item is to develop strategies to get better returns on your cash holdings. David Enna at tipswatch discusses a strategy of using ladders of short term tbills instead of savings or money market accounts.

https://tipswatch.com/2022/09/21/shor ... ive-now/
Thanks for the link.
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Re: Inverted Yield Curve ?

Post by billaster »

dual wrote: Thu Sep 22, 2022 10:45 am Another actionable item is to develop strategies to get better returns on your cash holdings. David Enna at tipswatch discusses a strategy of using ladders of short term tbills instead of savings or money market accounts.
Well, maybe, if you like fooling around for a few extra basis points.

Just holding on to a money market fund like VMFXX or VMRXX will get you close to the same rates. Both of these have jumped 0.07% in just one day after the Federal Funds rate hike and should be close to 3% in the next week or so. And if there is another rate hike in a few weeks, they should be close to 3.5%. Rapid increases in money market funds like this make even locking in 13 or 26 week Treasuries seem long term.

Opinions may differ on whether chasing a few basis points is worth the effort. Unless you have heaps of money in cash, just relaxing in a money market fund and chilling might be fine.
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Re: Inverted Yield Curve ?

Post by dual »

vineviz wrote: Fri Sep 23, 2022 12:26 pm
dual wrote: Fri Sep 23, 2022 10:56 am The motives of the major participants in the treasury securities markets are different from those of individual investors.
I see this statement trotted out every once in a while, but generally not by people who understand the motives of either individual or institutional investors.
Do you understand the motives? Please enlighten me.
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Re: Inverted Yield Curve ?

Post by dual »

billaster wrote: Fri Sep 23, 2022 12:57 pm
dual wrote: Thu Sep 22, 2022 10:45 am Another actionable item is to develop strategies to get better returns on your cash holdings. David Enna at tipswatch discusses a strategy of using ladders of short term tbills instead of savings or money market accounts.
Well, maybe, if you like fooling around for a few extra basis points.

Just holding on to a money market fund like VMFXX or VMRXX will get you close to the same rates. Both of these have jumped 0.07% in just one day after the Federal Funds rate hike and should be close to 3% in the next week or so. And if there is another rate hike in a few weeks, they should be close to 3.5%. Rapid increases in money market funds like this make even locking in 13 or 26 week Treasuries seem long term.

Opinions may differ on whether chasing a few basis points is worth the effort. Unless you have heaps of money in cash, just relaxing in a money market fund and chilling might be fine.
According to Vanguard, the yield of VMFXX is 2.24%.
https://investor.vanguard.com/investm ... le/vmfxx

The yield of a three month T bill is 3.18%

The difference, 94bp, is a lot more than a few basis points.
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Re: Inverted Yield Curve ?

Post by Northern Flicker »

dual wrote: Fri Sep 23, 2022 10:56 am Northern Flicker
Because there is no way to predict which outcome will come to be, there is no way to know whether shortening or lengthening duration will end up having been the preferred action.
Of course there’s no way to predict with certainty but we have strong evidence. For example, the US national debt to GDP ratio is about 137%. With this large debt, the increase in rates will lead to more interest rate expense increasing the deficit which is paid for by issuing treasury debt.

I know that next you will trot out the Boglehead nihilist efficient market, nobody knows nothing mantra. Well we disagree.
Just to be sure I correctly understand your position, are you claiming that you know more than the collective bond market as an input to your projection of future interest rates?
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Inverted Yield Curve ?

Post by dual »

Northern Flicker wrote: Fri Sep 23, 2022 4:25 pm
dual wrote: Fri Sep 23, 2022 10:56 am Northern Flicker
Because there is no way to predict which outcome will come to be, there is no way to know whether shortening or lengthening duration will end up having been the preferred action.
Of course there’s no way to predict with certainty but we have strong evidence. For example, the US national debt to GDP ratio is about 137%. With this large debt, the increase in rates will lead to more interest rate expense increasing the deficit which is paid for by issuing treasury debt.

I know that next you will trot out the Boglehead nihilist efficient market, nobody knows nothing mantra. Well we disagree.
Just to be sure I correctly understand your posting, are you claiming that you know more than the collective bond market as an input to your projection of future interest rates?
What I am saying is that the goals of the participants in the treasury security market are very different from mine as an individual investor. This website lists the participants in the treasury bond market. As you can see a large fraction of them are foreign governments or US agencies such as Social Security or banks. Individual investors are a small portion of the market.

https://wolfstreet.com/2022/05/19/who- ... curities/

The current and future yield curve reflects the needs of the large participants as buyers and the treasury and the fed as sellers and these are not necessarily mine. I am willing to bet that rates will not drop enough to offset the higher short term rates that I receive now.
Last edited by dual on Fri Sep 23, 2022 5:37 pm, edited 1 time in total.
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Re: Inverted Yield Curve ?

Post by billaster »

dual wrote: Fri Sep 23, 2022 2:30 pm
billaster wrote: Fri Sep 23, 2022 12:57 pm
dual wrote: Thu Sep 22, 2022 10:45 am Another actionable item is to develop strategies to get better returns on your cash holdings. David Enna at tipswatch discusses a strategy of using ladders of short term tbills instead of savings or money market accounts.
Well, maybe, if you like fooling around for a few extra basis points.

Just holding on to a money market fund like VMFXX or VMRXX will get you close to the same rates. Both of these have jumped 0.07% in just one day after the Federal Funds rate hike and should be close to 3% in the next week or so. And if there is another rate hike in a few weeks, they should be close to 3.5%. Rapid increases in money market funds like this make even locking in 13 or 26 week Treasuries seem long term.

Opinions may differ on whether chasing a few basis points is worth the effort. Unless you have heaps of money in cash, just relaxing in a money market fund and chilling might be fine.
According to Vanguard, the yield of VMFXX is 2.24%.
https://investor.vanguard.com/investm ... le/vmfxx

The yield of a three month T bill is 3.18%

The difference, 94bp, is a lot more than a few basis points.
You are looking at the previous 7-day yield. Those money market funds have more than 50% Federal Reserve repos that turn over every day and are currently yielding 3.05%. In a week or two the 7-day yield will be close to the current yield, around 3%.

Patience, Grasshopper.
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Re: Inverted Yield Curve ?

Post by dual »

You are looking at the previous 7-day yield. Those money market funds have more than 50% Federal Reserve repos that turn over every day and are currently yielding 3.05%. In a week or two the 7-day yield will be close to the current yield, around 3%.
It will be interesting to see what the yield on short-term T bills will be in the next few weeks.
Edit. The yield on six month T-bills is now 3.86%. That is more than a few basis points higher than the fed funds rate.
Edit. Vanguard money market rates are unusual. I pulled my funds from them because of their poor service.
Last edited by dual on Fri Sep 23, 2022 5:41 pm, edited 1 time in total.
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Re: Inverted Yield Curve ?

Post by vineviz »

dual wrote: Fri Sep 23, 2022 5:07 pm What I am saying is that the goals of the participants in the treasury security market are very different from mine as an individual investor. This website lists the participants in the treasury bond market. As you can see a large fraction of them are foreign governments or US agencies such as Social Security or banks. Individual investors are a small portion of the market.
What this argument lacks is any evidence (convincing or otherwise) that the "goals" of the different participants differ from yours in any material way.

Or, more importantly, that the presence of other investors in the market makes Treasuries unsuitable for your purpose.

Individual investors want the same thing from Treasuries that every other investor (including pension funds, insurance companies, banks, etc.) wants: a liquid investment that offers future cash flows which are predictable and free of default risk.
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Re: Inverted Yield Curve ?

Post by dual »

vineviz wrote: Fri Sep 23, 2022 5:39 pm
dual wrote: Fri Sep 23, 2022 5:07 pm What I am saying is that the goals of the participants in the treasury security market are very different from mine as an individual investor. This website lists the participants in the treasury bond market. As you can see a large fraction of them are foreign governments or US agencies such as Social Security or banks. Individual investors are a small portion of the market.
What this argument lacks is any evidence (convincing or otherwise) that the "goals" of the different participants differ from yours in any material way.

Or, more importantly, that the presence of other investors in the market makes Treasuries unsuitable for your purpose.

Individual investors want the same thing from Treasuries that every other investor (including pension funds, insurance companies, banks, etc.) wants: a liquid investment that offers future cash flows which are predictable and free of default risk.
I can say the same thing about you reading the market’s minds as you claim about me.

My reasoning is that institutional investors such as foreign governments, Social Security, and retirement funds have a very different time horizon needs than individual investors like me. In particular, they have long term committments and are more interested in long-term bonds than me and are buying up that segment of the market driving the yields down. With my shorter term requirement I can afford to take the higher short term rates now and risk that rates will drop in the future.
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Re: Inverted Yield Curve ?

Post by smooth_rough »

So long bonds get crushed until fed terminal rate has been established (4.5%?).
Last edited by smooth_rough on Fri Sep 23, 2022 10:35 pm, edited 1 time in total.
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Re: Inverted Yield Curve ?

Post by vineviz »

smooth_rough wrote: Fri Sep 23, 2022 6:17 pm So long bonds get crushed until fed terminal rate has been established (4.5%?).
No, that's generally not how it works.

Long term bond yields don't move reliably with changes in the Federal Funds rate. Often they don't even move in the same direction.

In other words, there's really no way to predict whether long-term bond yields go up from here or go down.
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Re: Inverted Yield Curve ?

Post by billaster »

dual wrote: Fri Sep 23, 2022 5:32 pm
You are looking at the previous 7-day yield. Those money market funds have more than 50% Federal Reserve repos that turn over every day and are currently yielding 3.05%. In a week or two the 7-day yield will be close to the current yield, around 3%.
It will be interesting to see what the yield on short-term T bills will be in the next few weeks.
Edit. The yield on six month T-bills is now 3.86%. That is more than a few basis points higher than the fed funds rate.
Edit. Vanguard money market rates are unusual. I pulled my funds from them because of their poor service.
And what are you going to do with your 6-month T-bill if the Federal Funds rate and money market fund goes to 4% or 4.5%? Sell it for a loss? Hold on for dear life?

Treasuries are fine if that's the sort of thing you like to do, but money market funds are fine too for short term cash.
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Re: Inverted Yield Curve ?

Post by quattro73 »

billaster wrote: Fri Sep 23, 2022 7:08 pm
dual wrote: Fri Sep 23, 2022 5:32 pm
You are looking at the previous 7-day yield. Those money market funds have more than 50% Federal Reserve repos that turn over every day and are currently yielding 3.05%. In a week or two the 7-day yield will be close to the current yield, around 3%.
It will be interesting to see what the yield on short-term T bills will be in the next few weeks.
Edit. The yield on six month T-bills is now 3.86%. That is more than a few basis points higher than the fed funds rate.
Edit. Vanguard money market rates are unusual. I pulled my funds from them because of their poor service.
And what are you going to do with your 6-month T-bill if the Federal Funds rate and money market fund goes to 4% or 4.5%? Sell it for a loss? Hold on for dear life?

Treasuries are fine if that's the sort of thing you like to do, but money market funds are fine too for short term cash.
Just keep rolling up the curve every six months?
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Re: Inverted Yield Curve ?

Post by dual »

billaster wrote: Fri Sep 23, 2022 7:08 pm And what are you going to do with your 6-month T-bill if the Federal Funds rate and money market fund goes to 4% or 4.5%? Sell it for a loss? Hold on for dear life?

Treasuries are fine if that's the sort of thing you like to do, but money market funds are fine too for short term cash.
I use 6 month tbills as an illustration to show how much higher short term treasury securities are than even your prophesised VMFXX money market fund rates.

If you look at the tipswatch post that I linked he uses shorter term tbills.

As I showed in my post, as of today, 3 month tbills are about 100 basis points higher than the current Vanguard money market rates. Vanguard may or may not catch up but it’s a moving target.
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Re: Inverted Yield Curve ?

Post by Northern Flicker »

dual wrote: Fri Sep 23, 2022 5:07 pm
What I am saying is that the goals of the participants in the treasury security market are very different from mine as an individual investor. This website lists the participants in the treasury bond market. As you can see a large fraction of them are foreign governments or US agencies such as Social Security or banks. Individual investors are a small portion of the market.

The current and future yield curve reflects the needs of the large participants as buyers and the treasury and the fed as sellers and these are not necessarily mine. I am willing to bet that rates will not drop enough to offset the higher short term rates that I receive now.
Nobody said that you need to lengthen duration. You said that the actionable thing is for others to shorten duration. I think if someone has been holding intermediate (or long) duration bonds, shortening duration now may or may not prevent future losses, but it certainly will lock in past losses.

With some cash to deploy into bonds, I've been dollar-cost averaging from a short-term treasury fund to intermediate treasuries, adding to existing intermediate treasury holdings, so I guess that means I'm technically lengthening duration. But it is just to get to my prior established target duration, which is unchanged. I hold treasuries to diversify various risks, not as a primary source of return.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Inverted Yield Curve ?

Post by dual »

OK that’s where we differ. As my Tbills mature, I am reinvesting them in short term bills. Prior to the beginning of this year, the Fed had a huge thumb on the scale so I did not buy any longer-term bonds, just one year or less Tbills.
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Re: Inverted Yield Curve ?

Post by Northern Flicker »

dual wrote: Fri Sep 23, 2022 5:59 pm
I can say the same thing about you reading the market’s minds as you claim about me.

My reasoning is that institutional investors such as foreign governments, Social Security, and retirement funds have a very different time horizon needs than individual investors like me. In particular, they have long term committments and are more interested in long-term bonds than me and are buying up that segment of the market driving the yields down. With my shorter term requirement I can afford to take the higher short term rates now and risk that rates will drop in the future.
So your position is not that other investors should shorten duration because of your projection of where future rates are going, but that they should hold a duration consistent with their liabilities. While it may be that institutional investors with long-term nominal liabilities are immune from the term risk and inflation risk of long-term bonds, and depress rates further out on the curve, any such effect is beyond the 10-yr rate.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Inverted Yield Curve ?

Post by grok87 »

the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
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Re: Inverted Yield Curve ?

Post by Northern Flicker »

Northern Flicker wrote: Thu Sep 22, 2022 7:28 pm If the inversion persists, it often portends (and can even cause) a recession...
Thought I would elaborate on this. While it commonly is stated that an inverted yield curve can be an indicator of a pending recession (though an unreliable one), it is less well known that an inverted yield curve can contribute to the cause of a recession.

Because banks essentially borrow short and lend long, the profitability of lending activity depends on the spread between short and long rates. If the yield curve stays inverted long enough, it will tend to reduce lending activity by banks due to the activity becoming less profitable or unprofitable. This can retard economic activity enough to cause or contribute to the cause of a recession.

But an inverted yield curve is an unreliable indicator-- while most recessions of even moderate severity are associated with an inverted yield curve, not all inverted yield curves are associated with a recession. Inverted yield curves are common during Fed tightening cycles. Time will tell if we have a recession.
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Re: Inverted Yield Curve ?

Post by Fat-Tailed Contagion »

grok87 wrote: Fri Sep 23, 2022 11:50 pm the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
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Do they mean 4 consecutive quarters of negative GDP? We are 2 in already. Do they mean 2 more before a postive GDP quarter?
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Re: Inverted Yield Curve ?

Post by Beensabu »

Fat-Tailed Contagion wrote: Sun Sep 25, 2022 7:23 pm
grok87 wrote: Fri Sep 23, 2022 11:50 pm the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
cheers
grok
Do they mean 4 consecutive quarters of negative GDP? We are 2 in already. Do they mean 2 more before a postive GDP quarter?
I think they mean the probability of more of the same plus higher unemployment. Until there is rising unemployment, it's just a low growth environment.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
grok87
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Re: Inverted Yield Curve ?

Post by grok87 »

Beensabu wrote: Sun Sep 25, 2022 7:42 pm
Fat-Tailed Contagion wrote: Sun Sep 25, 2022 7:23 pm
grok87 wrote: Fri Sep 23, 2022 11:50 pm the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
cheers
grok
Do they mean 4 consecutive quarters of negative GDP? We are 2 in already. Do they mean 2 more before a postive GDP quarter?
I think they mean the probability of more of the same plus higher unemployment. Until there is rising unemployment, it's just a low growth environment.
agree
RIP Mr. Bogle.
billaster
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Re: Inverted Yield Curve ?

Post by billaster »

Fat-Tailed Contagion wrote: Sun Sep 25, 2022 7:23 pm
grok87 wrote: Fri Sep 23, 2022 11:50 pm the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
cheers
grok
Do they mean 4 consecutive quarters of negative GDP? We are 2 in already. Do they mean 2 more before a postive GDP quarter?
No. On that chart they are using the NBER Business Cycle Dating Committee definition of recession, which is not as simple as two consecutive quarters of GDP. You can read about how the Committee determines the beginning and end of recessions here:
https://www.nber.org/research/business- ... -questions

The indicators they track are real personal income less transfers (PILT), nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, employment as measured by the household survey, and industrial production.

The New York Fed chart is showing the probability of a recession starting some time in the next 12 months is 25%.
grok87
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Re: Inverted Yield Curve ?

Post by grok87 »

billaster wrote: Sun Sep 25, 2022 9:39 pm
Fat-Tailed Contagion wrote: Sun Sep 25, 2022 7:23 pm
grok87 wrote: Fri Sep 23, 2022 11:50 pm the ny fed thinks the probability of a recession in one year is now 25%
https://www.newyorkfed.org/medialibrary ... ob_Rec.pdf
cheers
grok
Do they mean 4 consecutive quarters of negative GDP? We are 2 in already. Do they mean 2 more before a postive GDP quarter?
No. On that chart they are using the NBER Business Cycle Dating Committee definition of recession, which is not as simple as two consecutive quarters of GDP. You can read about how the Committee determines the beginning and end of recessions here:
https://www.nber.org/research/business- ... -questions

The indicators they track are real personal income less transfers (PILT), nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, employment as measured by the household survey, and industrial production.

The New York Fed chart is showing the probability of a recession starting some time in the next 12 months is 25%.
thanks- that's a good read. i found this quote helpful
wrote: Q: Typically, how long after the beginning of a recession does the committee declare that a recession has started? After the end of the recession?

A: Our determination of the trough date in April 2020 occurred 15 months after that date, in July 2021. Earlier determinations took between 4 and 21 months. There is no fixed timing rule. We wait long enough so that the existence of a peak or trough is not in doubt, and until we can assign an accurate peak or trough date.
to me this is a very important point. you often read financial porn saying "there is going to be a recession and then the stock market will go down". they often point to the NBER recession time series as evidence.

but the NBER decides on the start date the recession often more than a year after it started. The predictive relationship is the other way- stock market crashes may be predictive of a coming recession. it just LOOks like recessions are predictive of stock market behavior due to this timing lag.

cheers,
grok
RIP Mr. Bogle.
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JoMoney
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Re: Inverted Yield Curve ?

Post by JoMoney »

grok87 wrote: Tue Sep 27, 2022 7:41 am... you often read financial porn saying "there is going to be a recession and then the stock market will go down". they often point to the NBER recession time series as evidence.

but the NBER decides on the start date the recession often more than a year after it started. The predictive relationship is the other way- stock market crashes may be predictive of a coming recession. it just LOOks like recessions are predictive of stock market behavior due to this timing lag...
:thumbsup Yes!!! The stock markets performance is one of the data points used as a "Leading Indicator"
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
grok87
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Re: Inverted Yield Curve ?

Post by grok87 »

JoMoney wrote: Tue Sep 27, 2022 7:54 am
grok87 wrote: Tue Sep 27, 2022 7:41 am... you often read financial porn saying "there is going to be a recession and then the stock market will go down". they often point to the NBER recession time series as evidence.

but the NBER decides on the start date the recession often more than a year after it started. The predictive relationship is the other way- stock market crashes may be predictive of a coming recession. it just LOOks like recessions are predictive of stock market behavior due to this timing lag...
:thumbsup Yes!!! The stock markets performance is one of the data points used as a "Leading Indicator"
thanks. here's a link to the latest Conference Board reading on their Leading Economic indicator
https://www.conference-board.org/topics ... indicators
Looks like it is showing a recession signal.

These are strange times. We may have a technical recession. But personally i am not worried. I think the economy is strong. I think long term the economy is still headed to lower inflation/deflation and lower interest rates. This is all just a tempest in a teapot.

cheers,
grok
RIP Mr. Bogle.
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