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The yield spread of 10-2 year U.S. Treasuries < 0 on Tuesday. any comment on this? recession or end of rate hikes?

QuoteOriginally posted by: VolatileThe yield spread of 10-2 year U.S. Treasuries < 0 on Tuesday. any comment on this? recession or end of rate hikes?Sorry I do not understand your question. Would you mind explaining it a bit? My co-worker next to my desk told me it should be fine.

I think Vol's talking about the possible economic implications of US yield curve inversion. Not sure if a mid-term flattening could be described as a yield inversion or even whether most people share sentiment on the implication of a recession but it's nevertheless interesting to someone who doesn't 'do' macro.

agreed mutley... when the entire curve inverts one can imply a recession but that hasn't happend yet. Gartman makes reference to the mid-term flattening in today's morning newsletter.

Here is a good link on the implications of yield curve inversion from an expert on the subject...Yield Curve FAQs

QuoteOriginally posted by: VolatileThe yield spread of 10-2 year U.S. Treasuries < 0 on Tuesday. any comment on this? recession or end of rate hikes?interesting that when 2/10 inverts for few minutes everybody starts to talk about the end of the world etc. On the other hand nothing happened when 2/5 inverted few weeks ago... Recently it is hard to argue for recession - in fact I would rather suspect the current solid growth to be underestimated. Market wants to believe that FED will stop after 1 or 2 hikes but this is essentially a believe that is being unchanged during the past 13 mini-hikes...I can't imagine Bernanke will stop hiking - he need to do it if only for credibility of FED (which is much more important than few bips away from neutral - which nobody knows where it is anyway). Finally, there is absolutelly nothing wrong with the inverted curve - the only thing is that people need to get used to it. In fact under pure expectation hypothesis and non-zero volatility the curve should be inverted already when you expect short term interest rates to remain unchanged (say at 5%). This is due to longer bonds being more valuable due to higher convexity.When January 3rd comes I believe we will get consistently into a negative teritory for 2/10, February 9th and we are there with 2/30 too...

Quoteinteresting that when 2/10 inverts for few minutes everybody starts to talk about the end of the world etc.Is there anything else to talk about this week...?

yes, very true. nothing's wrong nor the end of the world. however, this affects the interest rates structured note holders most! eg USD libor range accural, CMS spread corridor, and so.

QuoteOriginally posted by: Volatileyes, very true. nothing's wrong nor the end of the world. however, this affects the interest rates structured note holders most! eg USD libor range accural, CMS spread corridor, and so.I do not understand. Why?