The Yield Curve Continues To Collapse...

As stocks soar back towards record highs shrugging off every fear as if it was 2017 all over again, the Treasury market is starting to scream 'trouble ahead'...

Since The Fed hiked rates in March, the yield curve has collapsed...

2s30s is below 60bps for the first time since Oct 2007...

2s10s is at 41bps intraday!!

5s30s is testing 30bps...

And 10s30s is back to just 17bps...

Even The Fed's Williams warned yesterday that he would view "yield curve inversion as warning signal" noting that a "inverted curve was a powerful recession signal" and added that "if the yield curve inverted, her would take it seriously."

Perhaps that's why stocks are up... in the irrational mind of today's central-banker-inspired investors, the closer we get to inverted, the closer The Fed is to ending its tightening cycle and hey presto... more QE, stocks go up!!??!!

"probably nothing..."

* * *

Bonus Chart: US Treasury 2Y Yields have never been this wide relative to German 2Y Bund Yields... ever...

Comments

FireBrander Wed, 04/18/2018 - 09:56 Permalink

What's a FED chairman to do?

The Dutch Boy lady screwed up the board, there is no where to move...the proverbial "painted into a corner" or Russian Roulette with a round in every chamber...

FireBrander DingleBarryObummer Wed, 04/18/2018 - 10:08 Permalink

The blood didn't come from the stone; it's from the FED hitting itself in the head with the rock.

The FED has to keep raising rates...it's the only "tool" they have to "save this sucker from going down" (quote Bush). Just remember, saving the banks comes first...so when thinking about what the FED will do, just ask "what is best for the banks?".

In reply to by DingleBarryObummer

el buitre Mustafa Kemal Wed, 04/18/2018 - 11:13 Permalink

The Controlling Hand which tells the Central Banks what to do is psychopathic and evil, but as stupid as Hannibal Lecter.  When they went to pure fiat for the planet in August of 1971, they knew it would have a lifespan of 40 years + or - 10.  The collapse is probably going to occur in 2018.  It could be hyperinflationary or deflationary depending on whether the CB's will choose to print at warp speed of not.  IMHO, based on their previous track record, they will print.  This will freeze up the credit markets, turning the whole planet, or at least the so-called West into a Venezuela.  (While it will hurt Russia and China, it is not clear whether it will be nearly as devastating as in the West for the man on the street.  They have obviously been preparing for this for years).  At this point, the Fed and the ESF are buying up most of the treasuries in the secondary market with thin air "money."  This is keeping the interest rates low and forcing money into the equities market.  When they stop, both the equities and bond markets will sink like a stone.  After a few weeks the world's sheeple will beg our saurian overlords to fix the problem they have created for decades if not centuries.

In reply to by Mustafa Kemal

lester1 FireBrander Wed, 04/18/2018 - 10:21 Permalink

Yield curve be dammed. As long as central banks keep on printing money and corporations keep cooking their books, this fraud of a financial market will go on much longer, only to make the coming crash far more worse!

In reply to by FireBrander

MARDUKTA Wed, 04/18/2018 - 09:58 Permalink

Nothing?  Just watch as all indicators converge on 'sell' button.

There was an old woman called Stormy,

Who loved an occasional dally

She sat on the lap

Of a well-endowed chap,

And said 'Hey, You're right up my alley!

FireBrander MARDUKTA Wed, 04/18/2018 - 10:03 Permalink

Of a well-endowed chap

The Orange-one? Well, then again, he's never bragged about size...

It's sad to watch Stormy, she's too stupid to realize how she's being used; all she sees is money...I see no value in what she has to say....geesh, used and discarded again...her family better start a suicide watch when the Left is done using her for their pleasure and no-one leaves money on the dresser...

In reply to by MARDUKTA

Harry Lightning Fiat Burner Wed, 04/18/2018 - 10:13 Permalink

The relative value of Bond yields is measured against inflation rather than economic activity. Although many thing those two factors are causally linked, history has shown they do not have to be and often move independently. A bond's value is measured by the buying power that the interest payments provide the investor, and buying power is a direct result of inflationary pressures. 

In reply to by Fiat Burner

FireBrander Adversus Wed, 04/18/2018 - 10:17 Permalink

"not looking for work"

Ok, Take your choice:

1. Don't work or work part time (20hrs) = Total Welfare benefits (depending on your state and other factors) of ~$40,000 a year.
or
2. A job at Starbucks making ~$25,000 a year having Blacks arrested for loitering.

Health Care/Insurance is a HUGE issue for low income folks...if a family isn't on Medicaid, they're looking at $12K to $16k a year just in insurance premiums to be paid with a job Grossing ~$26K a year.

For a large number of people, millions, it literally makes great economic sense not to work unless you can land a ~$50K a year job with great benefits.

In reply to by Adversus

CatInTheHat FireBrander Wed, 04/18/2018 - 10:38 Permalink

40,000 .a year??

WHERE?

Thanks to Bill, who sent all our manufacturing to China and Barry's bailout of banks, temp and part time jobs are now the status quo. Everyone wants, begs for full time hours but the corporate looters at the top won't allow it. Why give your employees full time hours so they can enjoy medical and dental benefits? 

FEW are choosing this. The delusion of a welfare state is just that. And with Trump's newly signed executive order whatever is left of 'welfare' will now be gone and fed to the MIC and corporate looters paychecks.  

 

In reply to by FireBrander

Harry Lightning Wed, 04/18/2018 - 10:08 Permalink

This is the biggest sucker trade since Bitcoin rose above 15,000. Long term yields are significantly below their average historical value relative to the benchmark inflation indices that all bond yields are measured against, mostly due to the unprecedented market manipulation of Central Bank bond buying. Now that the US Federal Reserve will be withdrawing progessively greater amounts of capital each month from the bond market as its Federal government borrows progressively greater amounts of capital each year, there just is not enough capital in the world to underwrite the amount of debt for sale...UNLESS there is a huge withdrawal ofd capital from equity markets. That is the precursor for a yield curve flattening, not a result. Which is why the flattening trade is bloody stupid to be put on now.

Long term US yields are poised for a big spike upward, as the fundamental and technical pictures for their immediate future are as supportive as they have been in ten years. The Federal Reserve water torture of slowly raising interest rates leaves it way behind the inflation curve, meaning that inflation will continue its upward trajectory until the Fed finally tightens to the point where businesses start feeling pain. You will know that point has come when heavily indebted firms, like Amazon which needs to finance a huge inventory to maintain and grow its business, start to see earnings erosion due to increased interest expense. That will be the time to flatten the yield curve. Until then, this trade has a great likelihood of blowing up in the faces of its sycophants, and they will deserve every cent of the loss for being stupid.

Pop3y3too Wed, 04/18/2018 - 10:17 Permalink

Yep, the yield curve is collapsing from "Metal Fatigue". Same reason my dingy sprung a leak ending up at the bottom of the lake.

Silver up almost 3%?

 

To the MOON, Alice! With a round trip to the bottom of the lake.