In 2002, the Yield Curve was extremely steep, with short
term rates at half century lows. This was extremely stimulative to economic
growth. Money was cheap, the carry trade was in full swing, and the Real Estate
market was just beginning to accelerate.


Yield Curve, 2002 versus 2006


Sources: StockCharts


In December, the yield curve was inverted, and today, it is
flat. The Fed finally got its wish, with the long bond responding to increased
Fed Fund rates. We wouldn’t be surprised if the curve ends up steepening as
traders sell the longer dated bonds.


Random Items:

Why it pays to invest in bosses who blame themselves

Fingers of Instability

In Japan, day trading surges in popularity

Wal-Mart’s dirty secret is out


The Menace of an Unchecked Housing Bubble

The New Wisdom of the Web

Top 20 Strangest Gadgets and Accessories


Quote of the Day: 

“To know values is to know the meaning of the markets.”
-Charles Dow


Note:  This was part of a larger research piece that was emailed to institutional clients on April 11, 2006 at ~10:00am


Category: Economy, Federal Reserve, Fixed Income/Interest Rates, Inflation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

Comments are closed.