Study of the U.S. 10Yr/3M Spread Interest Rate The 10-year US Treasury yield, in relation to the 3-month interest rate, turned positive today. This is an important economic indicator, frequently used to measure economic health and predict recessions. If we analyze historical data from years preceding significant financial crises, such as 2000 (the dot-com bubble burst), 2007 (the subprime crisis), and 2019 (the COVID-19 pandemic), we observe that the yield curve became negative before these crises. After the inversion, the economy entered a recession. Currently, we have moved from a negative to a positive rate scenario, which raises speculations: are we close to a new global economic recession? Some Speculations Tomorrow, we will have the Federal Reserve (FED) interest rate decision, which is crucial for the American and global economy. If the FED raises the interest rate: The short-term rate (3 months) rises rapidly, as it is directly linked to the FED's decisions. The 10-year rate may present two behaviors: If it rises: The market expects inflation to persist and growth to remain moderate. If it falls or remains stable: The market believes that the interest rate hike could slow down the economy, increasing the risks of recession. Where to Invest with this 10Y/3M Interest Rate Reversal? US Treasury Bonds (10 years) – Security and attractive yields. Corporate Bonds – Good rates in solid companies. Defensive Sector Stocks – Healthcare, consumer staples, and utilities. Gold and Precious Metals – Store of value and protection against crises. Dividends and REITs – Stable passive income generation. International Diversification – Risk dilution and global exposure. This is not an investment recommendation just a study. What do you think about this subject, what do you expect from this moment for investing? I'm honestly not looking for any investment stocks to buy, I think the ideal is to try to defend yourself by saving money, buying US treasury bonds, or if you're good at speculating in the market as a trader it could be a good idea. Tomorrow the FED (Federal Reserve) will make a decision, it's going to be very interesting. Stay well and happy studying and trading!
We already had a recession and they changed the definition of the term to protect Biden. It was just about the only well defined, agreed on thing in macroeconomics and they tossed it. https://www.breitbart.com/politics/...defining-recession-amid-economic-contraction/
Just posting the image I wanted to have posted, I couldn't edit the post again indicating with the arrows the three crises of 2000, 2007 and 2019. If I see something else that I can comment on or edit I will post it in the comments, I think you can only edit the post once. Thank you!
Do these spreads have the same meaning after 13 years of ZIRP, QE & financial repression? I personally have my doubts. I think the bifurcation of this economy makes anything hard to predict. Homeowners & asset holders are booming while everyone else is fucked. Interest rate impact is minimal to the homeowners since they are all locked in at rates 3-5% below the current rates.
Do you believe in a politically created recession, not a financially studied one? This is just a political maneuver, it does not reflect the situation of the market as a whole, it is like trying to artificially change the interest rate with the influence of politics, as was the case in Turkey, where they lowered the interest rate without any technique and the country entered an economic crisis. Changing the rules of the game is not that simple. But I still believe that some recession or economic crisis may be near. Thank you for comment!
I understand, but the funny thing is that we really don't know what might happen. Who would have thought that after the reversal of interest rates in 2019 we would have Covid? I believe that the price discounts everything, the big ones can't help but leave their traces in the market. Maybe a big war could happen, but I don't believe in that because if an economic crisis happens, few countries, who think well, won't want to go to war. But maybe something could happen in Europe or Asia. I believe that this interest rate study doesn't only concern the US economy, but also the entire world, because we are talking about dollars. Thank you for commenting and participating in the post.
30 year Freddie Mac has been dropping past 3 weeks (also faster than 10 yr yield percentage-wise). Curious what tomorrow's weekly reading will be?
After the interest rate spread became positive, global indices fell. Did you see that? I'll give you an example, which is the German DAX index. After my post on the 17th we had a decline in world markets.