Wednesday, December 14, 2005


Yield Curve 'Can Invert More' In US, Europe

Bloomberg notes a partial yield curve inversion in Europe. "Eurodollar futures, which settle at a three-month lending rate that traders set based in part on the Fed's target, yield less for contracts maturing in June 2007 than for contracts maturing in June 2006."

"The spread 'can invert more,' Richard Gilhooly, bond strategist said, especially if the housing market continues to show signs of cooling. The Mortgage Bankers Association today said its weekly index of refinancing activity fell to the lowest since June 2004."

"'There may be some people out there who believe the Fed is going to be finished here by the next FOMC meeting next year,' said David Glocke, who manages $9 billion in Treasuries at mutual fund firm Vanguard Group Inc. The outlook for growth means 'the risk is that yields would move higher, and my portfolios are positioned for that,' he said."

"The yield on the benchmark 10-year note fell 7 basis points, or 0.07 percentage point, to 4.45 percent at 2 p.m. in New York. The yield fell as low as 4.43 percent. Yields move inversely to bond prices. Shorter-maturity yields, more closely linked to the Fed's target rate, declined less on expectations that the central bank will still raise rates at its next meeting on Jan. 31. Ten-year yields drew within 8 basis points of two-year yields, matching the smallest gap between the two in four years. Five-year yields drew even with two-year yields at about 4.36 percent."

Minor note:

The 2 and 3 year inverted again today(7:30AM PST). This act is not a defining act towards a recession as the 2 to 10, or longer term variances imply. Just a lil food for thought. To my following, this is the 3rd inversion of the 2 to 3, and the 3 to 5 inverted once since July of this year.

The flattening continues, although at current pace it doesnt look to invert til, umm i dunno, March, and Ben B.'s first meeting. Welcome to the Party, here's your shovel.
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