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Treasury Curve Collapses To Flattest Since Jan 2009

Tyler Durden's picture




 

Bye bye NIM... The spread between 30Y and 5Y Treasury yields has collapsed to 151bps, its lowest since January 2009. It seems expectations for the exuberance of the business cycle expansion are a little underwhelming. This is half the Treasury curves peak steepness (hope) seen at the end of 2010...

 

 

On the day 30Y yields are down 2bps and 5Y is up 2.5bps...


 

Chart: Bloomberg

 

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Fri, 08/22/2014 - 12:13 | 5130010 101 years and c...
101 years and counting's picture

but, but.....recessions are impossible.  just ignore this stupid chart as meaningless since money printing cures ALL ills.  

Fri, 08/22/2014 - 12:13 | 5130014 nasdaq99
nasdaq99's picture

I thinkk the yield curve would already be inverted if the Fed didn't have their foot on the front end.

Fri, 08/22/2014 - 12:44 | 5130150 Aknownymouse
Aknownymouse's picture

I actually think the FED are magnifying the inversion since they are pushing up the short term yield by their inflationary printing. If they were out of the picture we would have deflation throughout the curve

Fri, 08/22/2014 - 15:28 | 5131108 disabledvet
disabledvet's picture

This doesn't make any sense though. If you're worried about inflation you buy the long dated stuff?

I would think the opposite...but I'm not a trader either.

"Sometimes you can look for too much of an edge." Hence "buy treasuries hand over fist."

Cash looks great here...silver looks to have a solid base around twenty too.

"Markets can stay irrational longer than you or I can stay solvent" and this one has clearly set the record. I've noticed a serious down draft in energy prices at the pump of late. Also a big supermarket chain just went bust in. New Hampshire.

Fri, 08/22/2014 - 12:13 | 5130016 max2205
max2205's picture

This is where the real money is made

Fri, 08/22/2014 - 12:14 | 5130017 Cognitive Dissonance
Cognitive Dissonance's picture

Damn....I hope The Fed can 'fix' that before it becomes a problem. They seem to be good at fixing a lot of things these days.

/snarc

Fri, 08/22/2014 - 12:56 | 5130206 IANAE
IANAE's picture

"before it becomes a problem." 

That's awesome...

Fri, 08/22/2014 - 12:15 | 5130024 clade7
clade7's picture

That bottom chart looks like the Okovango crocodile that ate General "Butt Naked"

Fri, 08/22/2014 - 12:21 | 5130039 LawsofPhysics
LawsofPhysics's picture

But, but, but, they are going to "raise rates" soon...

Fri, 08/22/2014 - 12:22 | 5130045 El Vaquero
El Vaquero's picture

They have to, but they cannot.

Fri, 08/22/2014 - 15:48 | 5131216 SeattleBruce
SeattleBruce's picture

Sounds like the classic definition of between a rock and a hard place..

Fri, 08/22/2014 - 12:23 | 5130047 dontgoforit
dontgoforit's picture

Why would anyone buy at those rates and at that spread why would you ever buy a 30-yr? 

Fri, 08/22/2014 - 12:26 | 5130054 El Vaquero
El Vaquero's picture

There are a few possibilities:

 

1) They're bankers who get free money from the fed to buy.

2) They're scared to the point of irrationality and are fleeing to "safety."  (Not that I think it's safe, but others will.)

3) Plain fucking stupidity.

4) "It can't happen here."

Fri, 08/22/2014 - 12:26 | 5130059 LawsofPhysics
LawsofPhysics's picture

If we really knew who all the "market" participants were you could probably begin to answer this question.

Fri, 08/22/2014 - 15:49 | 5131226 SeattleBruce
SeattleBruce's picture

Oh the market (the Fed) isn't transparent?  ;)

Fri, 08/22/2014 - 12:32 | 5130078 knukles
knukles's picture

Because rates are going to be low and lower for decades.
Welcome to the Japanese experience.
They've had 4 "lost decades"
JGB 10 year yields

1974:  8.00 %
2000:  1.70 %
2014:  0.50 %

Japan has been in a Liquidity Trap for 40+ years.
We are in a Liquidity Trap.
QED

Fri, 08/22/2014 - 15:40 | 5131168 disabledvet
disabledvet's picture

Gotta factor in an energy boom. "The biggest in world history."

That's not just the Bakken and Permian Basin but also Tesla's. If the a Vunderkind Musk has solved the the storage problem for electricity then latency is no longer an issue. Buffet could build out another 25,000 windmills and cost per kilowatt would plunge.

"Takes a lot of energy to make a lot of energy."

Fri, 08/22/2014 - 12:30 | 5130080 Tjeff1
Tjeff1's picture

Belgium is as Belgium does. 

Fri, 08/22/2014 - 13:14 | 5130312 Al Huxley
Al Huxley's picture

For the capital gains.  Once you remove the 0 lower bound on interest rates, the price can rise to infinity.  Think about it - bond investors make a massive killing on price appreciation, while the government pays off the debt by borrowing more and going further into debt - everybody wins!  I can't believe nobody ever thought of this before.

Fri, 08/22/2014 - 12:25 | 5130055 justmy2cents
justmy2cents's picture

It's OK when the SHTF they can always lower rates to stimulate the economy, oh wait a minute...

Fri, 08/22/2014 - 13:23 | 5130369 astoriajoe
astoriajoe's picture

maybe those black helicopters in Minnesota recently were really Janet doing a dry run for the Helicopter cash drop.

Fri, 08/22/2014 - 15:59 | 5131277 justmy2cents
justmy2cents's picture

They can try all they want it'll make no difference to the deflation monster

Fri, 08/22/2014 - 12:26 | 5130057 Maplehood
Maplehood's picture

OK I'm stupid.  What does NIM stand for?

Fri, 08/22/2014 - 12:30 | 5130079 clade7
clade7's picture

"Not In Mouth"  You arnt stupid, just not married...

Fri, 08/22/2014 - 12:39 | 5130132 LawsofPhysics
LawsofPhysics's picture

LMFAO!!!

 

Yes, according to my wife and her friends such activity is "pre-marital" only.

Fri, 08/22/2014 - 12:34 | 5130086 IANAE
IANAE's picture

...assuming this is a serious question (vs sarcasm...)

 

Net

Interest

Margin

 

edit: referring, among other things, to the yield spread that just evaporated for many with the curve flattening...

Fri, 08/22/2014 - 12:36 | 5130119 Maplehood
Maplehood's picture

IANAE - thank you.  Yes it was serious

Fri, 08/22/2014 - 12:29 | 5130071 CheapBastard
CheapBastard's picture

The leading indicator of our recession is our recession.

Fri, 08/22/2014 - 12:30 | 5130082 El Vaquero
El Vaquero's picture

Yeah, but you have to peel through the extraneous paper and BLS bullshit to see it.

Fri, 08/22/2014 - 12:38 | 5130130 clade7
clade7's picture

If the graph dont fit, you must BTFD!

Fri, 08/22/2014 - 12:31 | 5130091 Tjeff1
Tjeff1's picture

It will be very flat when all rates are at 0%

Fri, 08/22/2014 - 13:17 | 5130326 Al Huxley
Al Huxley's picture

But at least it won't invert!  (Unless those negative rates appear - so then what - short rates have to be more negative than long rates to signal a 'healthy' economy?)

Fri, 08/22/2014 - 12:52 | 5130186 IANAE
IANAE's picture

Of course, then there's this (from WSJ): "Pentagon calls on Russia to remove convoy vehicles from Ukraine immediately."

Fri, 08/22/2014 - 16:11 | 5131325 londoncalling
londoncalling's picture

0% in bonds (in europe) or risk a bail in sat on cash

yes yields globally can go lower, even if cash rate rises

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