Earlier this week, we brought to your attention "A World of (mostly) Flattening Yield Curves."
"But there are signs that the United States no longer has a monopoly on the conundrum. In recent months, the yield curves in Japan and Germany, the second- and third-largest economies in the world, have been flattening, while the yield curve in Britain has already inverted. "Long-term interest rates are even lower in Europe and Japan than they are in the U.S.," said Kenneth Rogoff, a professor of economics at Harvard.
Yet these economies lack some of the structural features of the United States economy. And each is at a different phase in the business cycle. While America may very likely have a slowdown in growth in the second half of this year, Mr. Rogoff says, Europe and Japan are likely to gain economic strength as the year progresses.
"The conundrum is global," said Lakshman Achuthan, managing director at the Economic Cycle Research Institute, based in New York. The same factors that are influencing the interest rate climate in the United States are having similar effects on overseas bond markets."
Of course, no discussion of Yield Curve flattenings or inversions would be complete without a graphic:
click for larger graphic
courtesy of NYT
I will point out that these curves are not as flat as the ones Panzner created, using the 2 and the 10 year Treasuries. (Dan, what duration are the treasuries used for the NYT charts?)
UPDATE: January 9, 2005 5:58am
I somehow missed the legend at bottom — The NYT chart show the full yield curve for the entire maturity (3 months outward), versus our prior chart showing the spreads between two and 10 year maturities over time.
The World Isn’t Flat, but Its Yield Curve May Be
NYT, January 8, 2006
Back on December 1, I mentioned that "Holiday sales increases can be in the 3 to 4% range." This modestly Bullish call was at the very low end of Wall Street projections.
The prime motivation for that range was the decreasing gasoline prices post Katrina, and the love affair with Plasma Screen TVs (that was the good news). Keeping the Bullishness modest was the negative real income for the middle class; on the other end, the increasing take home pay for the ultra wealthy supported the relative strength of the luxury retailer.
The WSJ reports that "overall, Retail Sales rose 3.2%." And, the big winners were the luxury stores. Its a pleasant surprise anytime projections like this end up that accurate.
I also wish to remind you (again) how the silly NRF projection of 22% was; Their absurdity was a statistical abomination (and they were chastised in this space for it)
Here’s the Journal’s summary:
Holiday shoppers spent big on a few products last month, but held out for last-minute deals, resulting in mixed performances from U.S. retailers. Cash registers rang at luxury retailers and teen specialty shops, but sales at Wal-Mart Stores Inc. disappointed.
Overall, sales at stores open at least a year, a measure known as same-store sales, rose 3.2% in December from a year earlier, according to an index of 66 chains compiled by the International Council of Shopping Centers. The trade group, based in New York, had expected same-stores sales growth between 3% and 3.5%. According to the tally, same-store sales at luxury stores grew 6.4%, while discounters ticked up just 2.6%.
"All combined it was good, not great," said Jeff Klinefelter, senior research analyst at Piper Jaffray. "When we finally got the last-minute rush, it was the higher-end consumer that followed through with spending."
Luxury Stores Were Holidays’ Stars
Overall Retail Sales Rose 3.2%, Slowed by Discounters; Holdout Shoppers Also Hurt
THE WALL STREET JOURNAL,January 6, 2006; Page A2
Mixed Stockings for Retailers
See the WSJ’s retailer chart here: