Tuesday, December 4, 2018

Market close 12/4/2018 inverted yield curve...

The 10 year treasury bond yield jumped up during the night of 10/3/2018 causing the sell off on 10/4.
Now the inverted yield curve causes the selloff on 12/4.

"inverted yield" = 1381 (Jewish) 221st prime
"inverted yield" = 152 (English Ordinal) SUM 300
Rosh Hashana 5780 is 300 days from 11/28/2018

Today is the 84th day in the Jewish/Islamic year
From and including: Tuesday, September 11, 2018
To, but not including Tuesday, December 4, 2018
Result: 84 days
Or 2 months, 23 days
Or 12 weeks

DoubleLine's Gundlach says Treasuries point to economy ready to weaken.

DECEMBER 4, 2018 / 11:46 AM

NEW YORK (Reuters) - Jeffrey Gundlach, chief executive officer of DoubleLine Capital, said the U.S. Treasury yield curve inversion on short-end maturities was signaling the “economy is poised to weaken.”

U.S. two-year Treasury yields rose above three-year Treasury yields on Tuesday for the first time in more than a decade as traders piled on bets the Fed might be close to ending its rate-hike campaign. The Dow Jones Industrial Average closed down nearly 800 points, or 3.10 percent, and the Standard & Poor’s 500 fell over 90 points, or 3.24 percent.

“If the bond market trusts the Fed’s latest words about ‘data dependency’ then the totally flat Treasury note curve is predicting softer future growth (and) will stay the Fed’s hand,” said Gundlach, who oversees more than $123 billion in assets.

“If that is indeed to be the case, the recent strong equity recovery is at risk from fundamental economic deterioration, a message that is sounding from the junk bond market, whose rebound has been far less impressive,” he said.

Yield curve inversions are seen generally as precursors of a recession. An inversion of the two-year and 10-year yields has preceded each U.S. recession in the past 50 years.

So far, there has been no inversion of the two-year and 10-year. The benchmark 10-year yield clung to an 11-basis-point margin over its two-year counterpart, although it was the smallest in over a decade.


U.S. Treasury yield curve inversion

"inverted bond yield" = 1122 (English Sumerian)
"U.S. Treasury yield curve inversion" = 104 (Chaldean)
"yield curves" = 58 (Jewish Reduction)

"bond yield curve inversion" = 277 (Jewish Ordinal)
"bond yield curve inversion" = 1089 (Satanic) 
square root 33 

The yield curve is a graph of interest rates on government bonds by their months or years until the bonds' principal must be repaid. The yield curve typically shows those rates for the Fed Funds rate (which is very short term), 3-month, 2-year, 7-year, 10-year, and 30-year.

As I first learned when I read William Greider's, Secrets of the Temple, the yield curve typically slopes upward -- with short-term rates lower than long-term ones.

The reason is that when the economy is expanding, investors are optimistic about the future so they are eager to borrow money at low rates and invest it in assets that they believe will grow in value and pay off in the future.

However, as Greider explained so well, the Fed can engineer a recession by raising short-term rates -- signaling its pessimism about the future -- and in so doing, causing the yield curve to invert.

An inverted yield curve means that short-term interest rates are higher than longer-term ones. The inverted yield curve is what happens when investors are bidding for longer-term bonds -- thus driving down their yields -- because they are pessimistic about the short-term prospects for the economy.

The most extreme case of this was in the early 1980s when Fed Chair Paul Volcker wanted to rid the U.S. economy of inflationary expectations by hiking the Fed Funds rate up near 20%.

This strategy caused a whopping recession as short-term credit became very expensive and people saw no reason to take the risk of investing for the long-term when they could put their funds in a money market fund and earn a nearly 20% return.

One particular yield curve -- the one for U.S. Treasury Department securities -- is a particularly powerful predictor of economic conditions. These are sold in 12 maturities -- One-month, two-month, three-month, and six-month bills; One-year, two-year,  three-year, five-year, and 10-year Treasury notes. and 30-year bonds, according to The Balance.

As The Balance wrote:

So why does the yield curve invert? As investors flock to long-term Treasury bonds, the yields on those bonds fall. They are in demand, so they don't need as high a yield to attract investors. The demand for short-term Treasury bills falls. They need to pay a higher yield to attract investors. Eventually, the yield on short-term Treasurys rises higher than the yield on long-term bonds and the yield curve inverts.

On December 3, the yield curve inverted a little bit -- the first time since the 2008 recession. The yield on the five-year note of 2.83 was 1 basis point (100 basis points = 1%) lower than the yield of 2.84 on the three-year note.

This is investors' way of saying that the economy will be a little better in 2023 than it will be in 2021.

The Treasury yield curve has been a good predictor of recessions in the past -- offering warnings of the recessions of 2000, 1991, and 1981.

But for the 2008 financial crisis, the yield curve was early. The first inversion occurred on December 22, 2005. The Fed was concerned about a housing bubble and started raising rates in June 2004 -- by the end of 2005, the fed funds rate was 4.25%.

The two-year Treasury bill yield hit 4.41% -- but the 10-year note was a bit lower -- at 4.39% -- the first inversion of -2 basis points.

The Fed kept raising rates -- they hit 5.25% in June 2006 -- and by July 2006, the yield on the 2-year note was 5.12% -- 5 basis points more than the 10-year note's 5.07% yield, according to The Balance.

The yield curve stayed inverted for almost a year and it was not until September 2007 that the Fed started lowering the Fed Funds rate to 4.75% -- cutting them to zero by the end of 2008.

The yield curve was then upward sloping -- but the economy was in free fall.


In the 2008 crisis the first inversion occurred on 12/22/2005 


From and including: Thursday, December 22, 2005
To, but not including Tuesday, December 4, 2018
Result: 4730 days
Or 12 years, 11 months, 12 days 121112 , 1112

in 18 days it will be 13 years....
From and including: Tuesday, December 4, 2018
To, but not including Saturday, December 22, 2018
Result: 18 days

The Treasury yield curve has been a good predictor of recessions in the past -- offering warnings of the recessions of 2000, 1991, and 1981.
But for the 2008 financial crisis, the yield curve was early. The first inversion occurred on December 22, 2005.

From first 2005 inverted yield curve to Scottish Rite day 2020 is 777 weeks...

No comments:

Post a Comment