Bond-rate curve and recession – Piggington's Econo-Almanac

This topic has 20 replies, 4 voices, and was last updated 15 years, 1 month ago by Chris Scoreboard Johnston.

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- February 21, 2008 at 1:43 PM #11882
  
  donaldduckmoore
  Participant
  
  In most of the time, bond-rate curve becomes inverted and it is an indication of a recession. So that in recession, we will be able to see the inverted curve. What causes the curve to bend like that?
- February 21, 2008 at 2:19 PM #157095
  
  Eugene
  Participant
  
  IIRC bond-rate curve becomes inverted before the recession. It’s the first sign that the recession is coming. Traders think that 1) stock market may be overvalued; 2) the recession is coming, therefore the Fed will have to lower the rates, so we should lock in high long-term rates; it’s better to invest your money for guaranteed 5% for 10 years ahead of time if you think that yields on 1-year bonds may come down to 2% for a while. Money flows from stocks and short-term bonds into long-term bonds.
  
  This time the curve got inverted in mid-’06 and remained inverted till mid-’07.
  - February 21, 2008 at 2:52 PM #157119
    
    donaldduckmoore
    Participant
    
    Now that we hear a lot of recession talks, but how come the curve is not inverted anymore?
    
    Another question is that if more money coming from the stock market and short-term bond to long-term bond, then should the 10-yr or other longer term bond rate reduce?
    - February 21, 2008 at 9:31 PM #157385
      
      cr
      Participant
      
      ddm, I believe so, and I believe the curve is no longer inverted (temporarily at least) because the FED slashed rates 125pts in the last 30 days. Someone correct me if I’m wrong.
    - February 22, 2008 at 7:48 AM #157486
      
      Chris Scoreboard Johnston
      Participant
      
      The curve is no longer inverted, it has been rising sharply actually in recent weeks, far from inverted presently.
    - February 22, 2008 at 7:48 AM #157777
      
      Chris Scoreboard Johnston
      Participant
      
      The curve is no longer inverted, it has been rising sharply actually in recent weeks, far from inverted presently.
    - February 22, 2008 at 7:48 AM #157788
      
      Chris Scoreboard Johnston
      Participant
      
      The curve is no longer inverted, it has been rising sharply actually in recent weeks, far from inverted presently.
    - February 22, 2008 at 7:48 AM #157798
      
      Chris Scoreboard Johnston
      Participant
      
      The curve is no longer inverted, it has been rising sharply actually in recent weeks, far from inverted presently.
    - February 22, 2008 at 7:48 AM #157871
      
      Chris Scoreboard Johnston
      Participant
      
      The curve is no longer inverted, it has been rising sharply actually in recent weeks, far from inverted presently.
    - February 21, 2008 at 9:31 PM #157676
      
      cr
      Participant
      
      ddm, I believe so, and I believe the curve is no longer inverted (temporarily at least) because the FED slashed rates 125pts in the last 30 days. Someone correct me if I’m wrong.
    - February 21, 2008 at 9:31 PM #157690
      
      cr
      Participant
      
      ddm, I believe so, and I believe the curve is no longer inverted (temporarily at least) because the FED slashed rates 125pts in the last 30 days. Someone correct me if I’m wrong.
    - February 21, 2008 at 9:31 PM #157699
      
      cr
      Participant
      
      ddm, I believe so, and I believe the curve is no longer inverted (temporarily at least) because the FED slashed rates 125pts in the last 30 days. Someone correct me if I’m wrong.
    - February 21, 2008 at 9:31 PM #157771
      
      cr
      Participant
      
      ddm, I believe so, and I believe the curve is no longer inverted (temporarily at least) because the FED slashed rates 125pts in the last 30 days. Someone correct me if I’m wrong.
  - February 21, 2008 at 2:52 PM #157407
    
    donaldduckmoore
    Participant
    
    Now that we hear a lot of recession talks, but how come the curve is not inverted anymore?
    
    Another question is that if more money coming from the stock market and short-term bond to long-term bond, then should the 10-yr or other longer term bond rate reduce?
  - February 21, 2008 at 2:52 PM #157423
    
    donaldduckmoore
    Participant
    
    Now that we hear a lot of recession talks, but how come the curve is not inverted anymore?
    
    Another question is that if more money coming from the stock market and short-term bond to long-term bond, then should the 10-yr or other longer term bond rate reduce?
  - February 21, 2008 at 2:52 PM #157431
    
    donaldduckmoore
    Participant
    
    Now that we hear a lot of recession talks, but how come the curve is not inverted anymore?
    
    Another question is that if more money coming from the stock market and short-term bond to long-term bond, then should the 10-yr or other longer term bond rate reduce?
  - February 21, 2008 at 2:52 PM #157500
    
    donaldduckmoore
    Participant
    
    Now that we hear a lot of recession talks, but how come the curve is not inverted anymore?
    
    Another question is that if more money coming from the stock market and short-term bond to long-term bond, then should the 10-yr or other longer term bond rate reduce?
- February 21, 2008 at 2:19 PM #157382
  
  Eugene
  Participant
  
  IIRC bond-rate curve becomes inverted before the recession. It’s the first sign that the recession is coming. Traders think that 1) stock market may be overvalued; 2) the recession is coming, therefore the Fed will have to lower the rates, so we should lock in high long-term rates; it’s better to invest your money for guaranteed 5% for 10 years ahead of time if you think that yields on 1-year bonds may come down to 2% for a while. Money flows from stocks and short-term bonds into long-term bonds.
  
  This time the curve got inverted in mid-’06 and remained inverted till mid-’07.
- February 21, 2008 at 2:19 PM #157399
  
  Eugene
  Participant
  
  IIRC bond-rate curve becomes inverted before the recession. It’s the first sign that the recession is coming. Traders think that 1) stock market may be overvalued; 2) the recession is coming, therefore the Fed will have to lower the rates, so we should lock in high long-term rates; it’s better to invest your money for guaranteed 5% for 10 years ahead of time if you think that yields on 1-year bonds may come down to 2% for a while. Money flows from stocks and short-term bonds into long-term bonds.
  
  This time the curve got inverted in mid-’06 and remained inverted till mid-’07.
- February 21, 2008 at 2:19 PM #157406
  
  Eugene
  Participant
  
  IIRC bond-rate curve becomes inverted before the recession. It’s the first sign that the recession is coming. Traders think that 1) stock market may be overvalued; 2) the recession is coming, therefore the Fed will have to lower the rates, so we should lock in high long-term rates; it’s better to invest your money for guaranteed 5% for 10 years ahead of time if you think that yields on 1-year bonds may come down to 2% for a while. Money flows from stocks and short-term bonds into long-term bonds.
  
  This time the curve got inverted in mid-’06 and remained inverted till mid-’07.
- February 21, 2008 at 2:19 PM #157475
  
  Eugene
  Participant
  
  IIRC bond-rate curve becomes inverted before the recession. It’s the first sign that the recession is coming. Traders think that 1) stock market may be overvalued; 2) the recession is coming, therefore the Fed will have to lower the rates, so we should lock in high long-term rates; it’s better to invest your money for guaranteed 5% for 10 years ahead of time if you think that yields on 1-year bonds may come down to 2% for a while. Money flows from stocks and short-term bonds into long-term bonds.
  
  This time the curve got inverted in mid-’06 and remained inverted till mid-’07.
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