Monday, December 19, 2005


Yield Curve Begins Inverting

Reuters reports on the treasury markets and the yield curve. "U.S. Treasury debt prices were mixed in quiet pre-holiday trade on Monday, as a soft reading of a construction industry index added to buying flows that were already in the market. The day's most interesting feature was a repeat of last week's inversion of the front end of the yield curve."

"Two-year notes were again yielding more than both three and five-year debt, though traders and strategists cautioned that thin pre-holiday trade clouded the significance of the move. Two-year notes were yielding nearly 2 basis points more than both three-year and five-year debt, and only 6 basis points fewer than 10 year notes, compared with 8 basis points late on Friday."

"'I haven't seen the flows, but it sure seems like there's some rate-locking going on,' said Gerald Lucas, a Treasury and agency debt strategist at Banc of America Securities."

"The market is now looking toward data on U.S. housing starts and producer prices due out on Tuesday."

Inverted yield curve, huge deficits, gold going up, housing prices starting to go down, and still the main stream economists and media remain positive about the future. Are they eternal optimists or just idiots? I'm voting for the latter.
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