Wednesday, August 14, 2019

The 2-10 inverted this morning, first time since 2007

The long bond also hit an all time record low. Meanwhile, the economy continues to hum along with no apparent imminent dangers other than trade disputes. I can think of a few forces that are pushing down on rates, but nothing to explain the extreme crushing underway. This will change the construction of my bond ladder as the next one matures in November. There is no pay off in middle or long duration bonds, so I'll stay sheltered in the short end. This is going to hurt pension funds over time. Let's see if the 2-10 ends the day inverted.

Thursday, May 30, 2019

More inversions, 2-10s continue to hold like Sparta

Effectively, no one gets paid for US Treasury duration beyond 3 months. You get 1 basis point for doubling the 3 month duration, then lose interest all the way out to 20 years. Still, the 2 refuses to invert compared to the 10. It doesn't smell right.

Thursday, March 21, 2019

Inversions out to 7 years, 2s-10s still haven't broken

The one month T-bill is paying 2.51%. That is better than anything else on the curve out to 10 years at 2.54%. The 7 year note is paying 2.44% We are still teasing the 2-10 inversion with a spread of 13 basis points, but so far, the recession indicator is holding. Since the 3rd quarter last year, the Fed has done almost a 180 on forward guidance. They eliminated rate increases for 2019 and plan to end the balance sheet run off in September. They are following the Bank of Japan script after the Japanese housing bust, but with better stock market results. Chairman Powell said in his conference yesterday that he didn't really pay much attention to the equity markets, but I don't know what else could have spooked him. Other major indicators have only slowed a little. I remain on inversion watch.