Yield Curve Un-Inverts, 10-Year Yield Spikes, Middle-Age Sag Disappears

Yield Curve Spaghetti!

It happened. Hallelujah. Or maybe better: Watch Out! The yield curve, after having been at least partially inverted all year, un-inverted today.

The yield curve still kind of flat at the short end, but the middle-aged sag is gone, and the long end with maturities of seven years and up is higher than the short end. It’s not exactly spectacularly steep, but all the long-dated yields are higher than the shorter-dated yields. The chart shows the yield of each maturity today at the close of the bond market, from one month on the left to 30 years on the right:

And this happened because several factors came together:

  • Prices of Treasury securities with longer maturities got battered in recent days – which means their yields rose. The 10-year yield today jumped to 1.86%. OK, that’s still low, but it’s a lot higher than where it had been in August (dipping to 1.47%). And the 30-year yield rose to 2.34%.
  • The Fed’s latest rate cut has been working itself into the yields of short-term Treasury bills. Also, the Fed is buying T-bills as part of its combat with the repo market. So it pushed up prices of T-bills and yields have fallen, with the one-month yield today dropping to 1.56%.
  • And the middle of the curve has adjusted and straightened out.

The Treasury yield curve inverted this year in a peculiar fashion: The 10-year yield was below the 2-year yield only briefly. But there had been a persistent middle-age sag, as I have come to call it, where the middle of the curve – maturities from six months to five years – was lower than not only the very short end of the curve (maturities from one month to six months), but also the long end, with maturities from seven years to 30 years.

The chart below shows the yield curves on seven days, from December 14, 2016, when the Fed got serious with rate hikes (green line coming up from the bottom), to today (the thick red line):

You can see how the rate hikes from December 2016 (green line) through December 2018 (black line, second from the top) pushed up short-term yields quite a bit, but did not move long-term yields much, with the 20-year yields of both being about the same. The refusal of the markets to push up long-term yields, as short-term yields were rising, flattened out the yield curve.

By December 2018, the sag in the middle was already appearing, and it got worse and worse until it maxed out in August 2019 (brown line). Since then, the Fed cut rates twice, which brought down the short end. In addition, long-term yields have risen.

The Fed will breathe a huge sigh of relief. Inverted yield curves are no good over the long term. Everything gets screwed up, from banking profits to investment decisions, when short-term yields are higher than long-term yields.

Part of the motivation for cutting rates had also been the desire to un-invert the yield curve. The Fed has instituted other policy changes this year that put slight upward pressure on long-term yields: It is replacing Mortgage Backed Securities and Treasuries of longer maturities on its balance sheet with short-term Treasury bills. These policy moves are designed to push long-term rates up – and it has started to happen.

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  103 comments for “Yield Curve Un-Inverts, 10-Year Yield Spikes, Middle-Age Sag Disappears

  1. Eastwind says:

    But what does it all mean Obi-Wan?

    Has the recession been cancelled? Or is this the dreaded ‘bear steepener’ that is the traditional successor to the curve inversion and the tolling of the last bell for the expansion?

    • Lance Manly says:

      It is definitely a bear steepener, whether or not it portends a recession, who knows.

    • Unamused says:

      But what does it all mean Obi-Wan?

      It means that macroeconomic and social perceptions and conditions can be manipulated, coerced, and adjusted with long-term programs so as to advance certain goals, none of which are in your interest.

      In other words, you really don’t want to know. It would only make you unhappy and you already have enough problems, and you can’t do anything about it anyway.

      Ask Mr. Natural. He’ll tell you.

      • RD Blakeslee says:

        Don’t ask me – Mr.Natural

        • NBay says:

          Not likely. He was one of several minor deities who appeared in late 60s-early 70s……all were banished from the earth by people over 30…..even fat freddy’s cat was not spared.

      • Lisa_Hooker says:

        I asked Mr. Natural what it all means and Mr. Natural said: “It don’t mean shyt.” Quite a philosopher that Mr. Natural.

    • Dale says:

      According to Gundlach, it’s not the inversion that is the recession indicator. It’s the uninversion after the inversion.

      We will see.

  2. Memento mori says:

    Dont jinx it Wolf, every time you get exited about the 10 year yield going up it crushes right back down. I think if one understands the unlimited powers the Dodd-Frank gave to the Fed (mainly that all they have to do to purchase assets in unlimited quantities is a phone call to the Sec of Treasury instead of going to Congress) then the idea that those yields are going up any time soon needs to be scrapped as obsolete.
    I think we are operating in a new paradigm and albeit those things move slowly, the reality will become apparent eventually, repression of savers, inflation and very low interest rates for the foreseeable future. I say Dow to 30k before the Nov election.

    • JZ says:

      Based on a friend of mine, Qualcomm have everybody 5%+ raise this week. Not individual performance based, but across board for everybody. While he is happy, I ask the question “Why?”. My fake news answer is this. Google and Apple and the likes comepete to hire in a “tight” labor market that drives up salaries.
      Good job, Powell. Finally the capitalist have to bow to the labor and give the labor more share of the profit.
      Please keep easing, resurrect WeWork and fund 10 more Uber so that all workers are hired! Full employment.
      Oh, wait, they have two mandates. Control inflation is the other one and they have added the 3rd one to keep stock market high. Hmmmmmmmm

      Let’s see what happens in this environment where US borrows at higher yield than Spain, bad CEO of WeWork gets rewarded and good CEOs got smoked by Amazon. For workers, whether you are good or NOT, you get paid because companies want to hire you to increase headcount for the sale/valuation of the company. The best is that when everybody sees 5%+ raise, everybody is happy and go out and vote! Yay!!!’

      What about 10/30 year bond? I see it as return free risk.

      • Lisa_Hooker says:

        Wonderful news! (sarc) Pay raises for everyone. It should only take a year or two for prices of food, shelter and hard goods to go up 5% – or maybe 6 or 7 or 8%. Social Security COLA will go up 2%.

  3. Weary Patience says:

    Beware the steepening?

    • roddy6667 says:

      Art Bell will make a comeback from the grave for that episode.

    • Ted says:

      Isn’t it true that the curve uninverts prior to a recession?

      • Wolf Richter says:


        Here is what’s true: The yield curve always un-inverts. And recessions always come sooner or later. We know that for sure.

        One comes before the other. We also know that. Unless they overlap a little, which can happen. So if we get a recession in 2020 or 2021, people will say the yield curve predicted it.

        But here is the thing: the yield curve inverts because the Fed raises its policy rates that push up short-term yields, and for whatever reason, long-term yields don’t rise with them. So the curve eventually inverts. The Fed pushes up short-term rates to slow the economy and inflation. In the past, this has triggered recessions, which slowed the economy and inflation. Goal accomplished.

        So when the Fed pushes up rates quickly and far, as it used to do, you can expect a recession. And everyone knows that, and the bond market knows that, and inflation expectations in the bond market come down, which are priced into long-term yields, and other factors are priced into long-term yields, and so long-term yields come down when markets expect a recession, and the yield curve is just one indicator of that process.

        Then the economy slows, and the Fed cuts rates, and short-term yields fall. Markets, being forward looking, begin to price in the end of the recession, and long-term yields might tick up, and the yield curve un-inverts. This is the moment a recession might actually arrive. Recessions are often short and mild, lasting a couple of quarters, and then the recovery starts. The Financial Crisis was a banking system failure that then led to the Great Recession. That was a unique experience in my lifetime.

        But the Fed raised rates very slowly this time, stopped early, and now reversed part of the rate cuts. This is not how it worked in the past. Plus, there is huge demand from NIRP countries overseas for US Treasuries, which in part contributed to the downward pressure on long-term yields in the US.

        We’re still going to get a recession someday. There is no way around it. They’re part of the business cycle. Maybe in 2020, or in 2021, and maybe later. It’s not going to be in 2019 though.

        • Jeremy says:

          I think this time around we get inflation, combined with continued weak growth due to macro headwinds.

          As you’ve noted many times recently, services are doing too well right now for the overall economy to go into recession. Right now.

          However, add in a negative external event (Iran bottling up the Straits of Hormuz? A failure in trade negotiations with China?) and we could be looking at 70s style stagflation.

  4. Willy2 says:

    – This is THE SIGN that “risk appetite” is waning when longer term T-bonds are less bid.

  5. d says:

    Herr Richter.

    QE Fueled market manipulation, Fed instigated interest rate repression.

    Do we now have FED REPO actions, effectively Manipulating the Yield curve, making it a FALSE Economic indicator?????

    • Wolf Richter says:

      Yes, my feeling all along has been that with central banks manipulating the government bond market to this extent, including repo action, reverse-repo action, QE, halting QE, and unwinding QE the way the Fed did until earlier this year, which lengthened the average maturity of its holdings, and then restarting asset purchases, and with bond-market participants expecting this kind of manipulation and betting on it … the yield curve is more a sign of central-bank manipulation than of the economy.

      The Bank of Japan has an official policy of “yield curve targeting.” It manipulates actively the long end of the curve and totally controls the government bond market. So the Japanese yield curve only shows what the BOJ wants it to show.

      But rising long-term rates do impact the economy, in various ways, in all directions.

      • Kent says:

        But isn’t that the very purpose of the Federal Reserve? To find the right balance of interest rates that maximizes employment and minimizes inflation? I don’t think the Fed is doing anything unusual in its over 100 years of existence. Just these days, with the availability of the Internet, folks are surprised to discover that our myths of capitalism have always really just been myths.

        • d says:

          Pre the QE market a yield curve inversion was a reliable indicator of an impending main-street recession.

          “Investors” frequently react to, “Indicator’s”.

          Now one of the commonest and most trusted indicators, has been manipulated, to placate all, but those with access to more reliable private indicators.

          What the FED has done with this repo action is manipulate that indicator to say something else. In an attempt to stop many small investors jumping ship

          Not to take action “To find the right balance of interest rates that maximizes employment and minimizes inflation? ” If it was doing that we would have interest rates around 3.00% < which would have P45 in MAJOR tantrum mode.

          In the past the OLD REPO facility simply kept short term liquidity Available for/to institutions with large T holdings.

          This time it appears to be being used in a targeted manner to manipulate the Yield curve, to say to the public, what the FED wants it to say. That is a potentially DANGEROUS game.

          Even worse we dont have QE 4, however this REPO action is having the same effect as QE did. THIS IS EXACTLY WAHT AMERICA DOES NOT NEED. As the people getting the money are "Investing" it, so keeping all the gain at the top, just as QE did. Instead of it being spent, so it moves through the economy and everybody gets a piece.

          Once the facility is established and stabilized at the size the FED wants we shall have to see how it flows out over time.

          The negative effects may be short term.

          At the moment we are only talking about 175 B which is only 2 months of QE 3 (APP).

      • Gandalf says:

        So why would the Fed manipulate the 3 month – 10 yr and 2 year – 10 yr rates to produce a yield curve inversion at all? Its own policy papers and charts and graphs have documented a solid connection between these yield inversions and the onset of a recession within 2 years.

        If the Fed was so All-Wise and Powerful, why did it not PREVENT these inversions from happening? Wouldn’t it be great if recessions never ever happened? Why doesn’t the Fed prevent these recession signals from happening in the first place?

        I agree the Fed has been manipulating the yield curves. But I do not believe that the Fed deliberately caused the yield curve inversions. They were spontaneous and the Fed has been acting vigorously to un-invert them, mainly by lowering the Fed fund rate three times after trying to raise rates in 2018.

        The result has been very small and short yield curve inversions this time around. Will that translate into a small and short recession?

        Or will this just prop up and inflate further the massive debt bomb and asset bubble created by the Fed’s low rates in the first place, causing an even bigger explosion when it finally all goes to heck?

        • Memento mori says:

          You are asking the right questions, if the Fed was so omniscient and omnipotent , why did we have crashes and recessions in the past?
          There are two schools of thought I think.
          Some say the Fed controls everything the short end and the long end, they basically can set a target for the yield on the 10 year and keep buying till the target is reached.
          Some say that all the Fed does is follows the bond market, so if the bond market is pricing the treasuries below the Fed funds rate, they simply start easing (cut rates) to match it, as they did this summer.
          What I think is missing from the picture is that the paradigm has changed, the fed might not be omniscient (if it ever was) but it really IS omnipotent in ways that it was not before 2009.
          Any analysis has to take this into account, otherwise it is not complete. People seem to forget that it used to be unthinkable for the Fed to buy bonds, inconceivable! We have come a long way. So yes, I think it is impossible to know why the curve inverted and if it has any predicting powers if we just compare it to the past.
          I think we should rather try to see how our society might start to accommodate an omnipotent Fed (who is de facto the most powerful institution in the country, forget congress and president) and how all this freshly printed money might affect our future so one can try to preserve personal wealth/finances.

        • NARmageddon says:

          Yield curve inversion (YCI) is caused by Wall St *betting* on a recession and *betting* on FRB responding by forcing down short-term interest rate (the FFR to be specific).

          YCI is not an organic or natural predictor of recession.

          More in another below.

        • d says:

          “The result has been very small and short yield curve inversions this time around. Will that translate into a small and short recession?”

          NO as the US Yield curve, just like the Japanese one, is now telling Economic lies.

      • Jeff Relf says:

        Last 40 years, all over the world,
        money has been steadily, predictably,
        moving into the US dollar; specifically,
        into 30 year T-bonds, looking for a safe haven.

        Fed wonks had nothing to do with it;
        they own 1.4% of the 41 Trillion U.S. Bond Market.
        Shadow banks, Fannie Mae and Freddie Mac, are scary zombies.

        Global OverSupply is real.
        OverSupply of high-income housing is real; especially in
        Australia and Canada, as money flees Hong Kong.

        UnderSupply of low-income housing is real;
        kids are sleeping on the streets, like stray dogs.

        Trump’s (backwards) “solution” is trade tariffs;
        apparently, he’s never heard of the Smoot-Hawley Tariff Act.

        Elizabeth Warren’s “solution” is to seize the assets
        of the wealthiest ( i.e. baby boomers ) and
        hand it to the poorest ( millennials ).

      • raxadian says:

        Wolf, economic manipulation at a grand scale was first seen with the roman empire.

        So this isn’t anything new

        And notice that I say “At a grand scale” because how big the Roman Empire was. Economic manipulation itself is way older. And Corruption even predates coins as currency.

        Now, how about an article about the White Elephant aka when will Mortgage Backed Securities  blow up?

      • d says:

        Which means it US Yield curve is now worthless a general US Economic Indicator.

  6. Jeff Relf says:

    The 30 year T-bond yield has been dropping steadily,
    predictably, naturally, for 40 years now;
    you can bank on it, as Gary Shilling has.

    Short-Term rates are in the hands of lunatics;
    when the yield curve inverts, we know they’re drunk,
    and we should take away their keys.

  7. Iamafan says:

    I’d be watching Chinese Euro bond sales and how that takes investible money away from the dollar.

    • Unamused says:

      There is never a shortage of ‘investible money’. You are allowed to believe so because you are not in on the game. For those who are, money is an accounting fiction with existential fungibility.

    • Hence these warring downgrades which are merely third party state of the currency directives. NIRP in the EU has the desired effect of supporting the currency, dollar is in the crosshairs, and no one thought gee, China stopped pegging to the dollar and the Yuan held up? Respect me respect my money. Beggar thy neighbor no more?

  8. Old-school says:

    A few thoughts:

    1. Let’s trust the Fed to keep inflation a 2%, then real rates are negative to around 20 years and after taxes are negative throughout curve.
    2. This means Congress gets paid to borrow as I think the average maturity is around 7 years, maybe even 5.
    3. Hussman says that basically federal deficits end up as corporate profits so between the Fed and Congress there is a real tail wind for stocks and probably why the valuation is so high.
    4. I think the student loan debacle will be an indication how the excessive debt will play out. The winner so far has been university employees and the loser students who took out the loan because they were not financially literate enough to know what they were doing. Somebody is going to eat the loans that can’t be paid back. Will they drag in the third party tax payer to eat the loan. The Fed’s could get tough and extract it from universities.

    • NBay says:

      #3 –
      Hindsight has caused me to take that as an overall truth, ever since it started c1980. I may not know all the major players and the degree of their causative roles, but I sure know who was the first mouth piece they selected to roll out the entire program.

  9. David Hall says:

    Demand for house flipping loans is driving mortgage rates higher. Flipping activity seen in Las Vegas and Phoenix. Miami seems like a bubble.

    Federal Deficit/GDP ratio is near a seven year high.

  10. My guess is interest rates in America start to move upwards at the start of May 2020 and will peak at the end of September 2020. From there rates will fall into the negative by the first quarter of 2022. Peak interest rates the end of September 2020.

  11. Augusto says:

    The yield curve’s movement represents potential problems, it is not “the problem”. As a retired auditor, I can honestly say, “fixing“ the numbers instead of the fixing the underlying problem(s) the numbers represent is a recipe for disaster. I think we are captive of a narrow minded and unimaginative establishment who can see nothing beyond “normalcy”, that is everything must look the same as it did yesterday, to the extent possible. Its like painting over the cracks in a support beam holding up the roof, “look magically the problem is solved”, really? I mean really?…

    • Unamused says:

      “fixing“ the numbers instead of the fixing the underlying problem(s) the numbers represent is a recipe for disaster.

      That’s true for most people, but not for whom those numbers are fixed.

    • James Levy says:

      And right now that’s the bias–towards normality, towards business as usual, towards protected the money and power of those who already have money and power. The media are unabashedly establishmentarian. They work their fingers to the bone to push a Biden or a Klobuchar or a Mayor Pete not because they are “liberal”, but because those people represent, support, and will defend the status quo. And the status quo is a house of cards.

      • Kent says:

        Absolutely right. And those who already have money and power are also the major shareholders of the media. Which is why it is so establishmentarian.

        Our choices in the election are gut the working/middle-class while supporting LGBTQ+ issues or gut the working/middle-class while supporting traditionalist Christian issues. Whichever you prefer. Expanding the working/middle class at the expense those with wealth and power is not on the menu.

        • Zantetsu says:

          Are you discounting Bernie Sanders?

        • NBay says:

          Kent and James reflect my take.
          Well said, and so blatantly obvious to far too few.

          I donate what I can spare to Bernie, Liz, AOC, Wikipedia, and once to Wolf.

          I wrote Bernie in as I am in California and can waste a vote, and will do the same again.

          But I realize it is only a small statement of my preferred general direction, I am not one of those “United Citizens”….nor part of the majority…….far far from it.

          And I watch all advertising with fascination, knowing it must work on someone. I dropped out at Stereo.

        • SteepDiscount says:


          You mean pro Mr. Lockheed Martin welfare? He trades a premium if you are into sending working/middle-class to play resource denial for a buck or two.

          Though Clinton might buy up for buying him again, or maybe Masayoshi Son-dono since hes into paying for overpriced bullshit no matter the flavor of smell.

      • Augusto says:

        I don’t necessarily subscribe failure to innovate with self interest or personal greed, although it is undoubted important to some. In fact, there are an increasing number of billionaires who are truly concerned by wealth inequality, not that many want to give up their money personally, but they had that instinctive, spidey sense that this will end badly (for them). But they effectively have no solutions or at least no solutions that haven’t been tried before

        I’ve just found that people, especially leaders, are captive to their past. To really change or to really embrace change is rare. As to the general population, what do they look to: socialism and communism, talk about two systems of absolute failure. Personally, how about something that has shown to work in the past, like for 10000 years and still does today: hard work, saving, self-reliance and self-discipline. Nope, can’t have all that might have to put the phone down for 5 minutes…….so lets invent a comic book world of magic solutions and super heros…….Joseph Stalin au moderne here we come….

        • Lisa_Hooker says:

          Having worked hard and been self disciplined and saving at 4.5-5.5% for 40+ years, I was shocked, shocked I tell you, to find upon retirement my savings now yielded 1/10 to 1/4%. I saw them when they moved the goalpost but there was nothing I could do about it.

        • NBay says:

          The Neolithic Revolution.
          However it made it possible for people to get very rich and powerful WITHOUT the first two virtues that you name. In fact, even without ANY of them, if you were born to the right parents.

    • Paulo says:

      If interest rates go negative, it’s all over, imho. Plus, I’ve pretty much had it. At 64, I’ve given up hoping for a future fair return on savings as ‘whoever’ will just loan new money into existence, anyway. If there is a cost to that ‘free’ money, people won’t borrow and everything comes to a grinding halt.

      An extra 1-2-3% in returns is also a meaningless investment as currency debasement and additional unstated inflation is always keeping up it seems. Oh well, my kids will get the property. They will get some monopoly money, (I still save), and my poor son-in-law can curse me as he hauls away my 1954 Southbend lathe. Meanwhile…..making plans to enjoy the days going forward.

      You know what? I have relatives who don’t follow the news or economic trends. Maybe they’re the wise ones after all. Mind you, they’re pretty broke. :-)

      • RD Blakeslee says:

        Yeh, Paulo, but you and I “follow the economic trends”, but we ain’t broke.

        “Following” ain’t participating …

      • Lisa_Hooker says:

        My lathe is now a Logan. Had to sell the 3 foot bed SB 10k when I closed the shop. People will be cursing when they clean out my basement and garage.

  12. Michael Engel says:

    1) Today, at the close, is De-M day #9.
    2) SPX peak might be two days behind.
    3) If correct, the 10Y will tumble down.

  13. Michael Engel says:

    that’s my last comment

    • Wolf Richter says:

      I have said this before and I apologize: You — like many others here — are caught up in a new algo problem of my third-party AI-driven anti-spam system that I don’t control. I have mentioned this before. This started a few days ago. A lot of comments are sent automatically to moderation for reasons I don’t understand.

      I have asked commenters to be patient. I know it’s not fun. But AI has its disadvantages.

      The problem cropped up before and then returned to normal. So I guess this is what will happen here. Meanwhile, I’m checking every hour or two so comments don’t get hung up for too long.

      • RD Blakeslee says:

        First it was gremlins. then it was kilroy. Now it’s hackers?

        • Wolf Richter says:

          No hackers. Just an aglo being confused :-]

          Confused algos making wrong decisions is a phenomenon that happens all the time. Hence the issues with Tesla’s autopilot and the like.

        • sierra7 says:

          Comments going into “moderation”….gotta be the Russians!
          That’s ok, Mr. Richter……I thoroughly enjoy reading the articles, the comments and trying to understand enough to be able to try make “coherent” comments. If they are “held in moderation” (which all of mine have recently) maybe they need to be!!!!
          When the “algos” completely take over when you order a good burger you will receive breakfast “mush” with artificial bananas!

        • Wisdom Seeker says:

          “Confused Algo” is another term for “Artificial Insanity”, the current reality-based version of “Artificial Intelligence”.

      • Zantetsu says:

        Probably a more interactive comment system where we the readers could flag spam instead of relying on an AI to prevent it ever being posted, would be the most effective and least troublesome solution.

        Why not just use Disqus? It’s so superior to every other comment system I ever see on any other website …

        • Wolf Richter says:

          You have likely not seen comment spam. It’s nasty. This site can get 100+ spam comments overnight on some bad nights. Some of them have many dozens of links in them. There is a lot of porn of all types. Some of these spam comments are very long, like thousands of words. If, as reader, you encounter this toxicity, you’re done with the comment section forever. This stuff must not be allowed to ever see the light of the day.

        • Zantetsu says:

          Wolf — thanks for the details. I had no idea it was that bad …

      • Mod4Hire says:

        Comments held in moderation 2-3 days? Certainly that means that no human is involved, once something is flagged for moderation, I assumed it was screened by a human and put in a queue, but with multi-day lag, I think maybe the humans have given up :)

        • Wolf Richter says:


          I will never publish some of the comments you posted under various names because they’re just too crazy. You’re posting from Asia, and I don’t know what your agenda is. But whatever your agenda is — and clearly you have one — I won’t let you use my platform to promote your agenda.

    • TownNorth says:

      Hope you continue to comment. I look for yours, and Petunia’s, and many others.

  14. Joe says:

    Haven’t finished decimating the middle class with more inflation and taxes.
    Canada is getting their second wind in inflating their housing. As municipalities increase their budgets…

    • Joe says:

      What’s with the moderation?
      Classed a terrorist?
      Never said fuck or anything.

      • Wolf Richter says:

        I have said this before and I apologize: You — like many others here — are caught up in a new algo problem of my third-party AI-driven anti-spam system that I don’t control. I have mentioned this before. This started a few days ago. A lot of comments are sent automatically to moderation for reasons I don’t understand.

        I have asked commenters to be patient. I know it’s not fun. But AI has its disadvantages.

        The problem cropped up before and then returned to normal. So I guess this is what will happen here. Meanwhile, I’m checking every hour or two so comments don’t get hung up for too long.

        • Joe says:

          Thank you Wolf.
          The modern convenience of new technology sometimes suck when they don’t quite work right.

        • Lisa_Hooker says:

          Wolf – many thanks for operating a site that keeps most if not all of the crud out. I have always wondered if it’s possible to have an editor that disallows pasting. That could prevent the 4000+ word ctrl-V and drag-and-drop contributions. I can live with having to type everything.

        • Wolf Richter says:

          Even I copy and paste my longer replies from Word into this thing. I don’t want to take this option away from commenters and myself :-]

        • d says:

          Last time round some, browser settings and add-ons (Or even the browsers themselves) may have been a factor.

          This may be a factor for the new “Group” being targeted, by the AGLO.

          Also what did the Aglo creator and maintainer, or one of their juniors, change that they haven’t and may never, tell you about?

      • nick kelly says:

        What is with these guys getting their knickers in a twist about being moderated?
        I’ve been a contributor to WS and for some reason most of my comments are moderated. Then about a hour later, they are un-moderated. So what?

        • NBay says:

          Agree 110%. And even if they are deleted, so what?
          A small price to pay for civil, intelligent, educated original thoughts, observations, etc, whether one agrees, or completely understands, or not.
          Much better than talking heads on TV or those who just echo them mindlessly, or submit their favorite reading list.

          Not to mention just plain destructive verbal vandalism of the whole effort.
          BTW, I liked the typo “aglo” as a derogatory term for algorithm, as in”useless stupid pain in the butt aglos”

  15. DR DOOM says:

    For people who have no debt and can live on their income the yield curve provides a source of entertainment watching analysts twist themselves in knots talking about it. I have never had a person point out to me another person who was destroyed because they had no debts. However,their houses are small and their vehicles are old. They eat beans and ‘taters at home. You see them canning excess produce at the end of a growing season while their smart phone trained off-spring point out to them canning is a losing proposition. The Debt Free people are a cult. Their off-spring were raised in a house too small for private conversation. They were under constant surveillance. They were told if they don’t want to learn at school then learn a trade. The Debt Freeers watched blackberries ripen but could care less about watching the yield curve. The Debt Freers knew that the people in charge of the yield curve considered their debt free status as a threat to the people who were interested in the yield curve. The yield curve creatures held such contempt that they insured that they would punish the Debt Freers by eliminating the Natural Interest rate and thus warn others who dared to join the Debt Free cult that they were not valuable to the people in charge of the yield curve.

    • Paulo says:

      Hilarious, Dr Doom.

      This no-debt cultist retired at 57 because of it, and now my xer and millenial children are seeing the rancher we lived in was pretty nice, after all. Plus, they also have their own homes and watch their debt. I learned this cult from my Great Depression survivor parents; Debt is bad…no debt means freedom…be a free person and control your life. They were right, go figure.

      And, 8 cases of home canned salmon in the pantry and two freezers full of vegetables. ‘Taters in the crawl space right next to the garlic. We’ll be fine.

      • sierra7 says:

        “….. two freezers full of vegetables.”
        Hope you don’t live within the CA PG&E PSPS program (Public Safety Power Shutoff) areas! LOL!
        Do agree with the “debt free” living.
        That is a revolution in itself.
        It’s a “no, no” in this system!
        I clearly remember the Great Depression (89 yrs old); even the debt free suffered……….The life my parents and extended family did to survive!
        (Now, into “moderation we go”!! LOL!)

      • Dave Kunkel says:

        My wife and I are also Deft Freeers. We paid off our house 30 years ago and have never borrowed to buy anything else. Surprisingly, several of our grandchildren are also in the cult.

      • WES says:

        Paulo: I agree being a saver and being debt free is now considered a crime by central bankers and governments. So now I am a criminal!

        Many of today’s folks consider it to be too much hard work and effort to be free.

        Debt slavery is so much more appealing because it is so much less effort./s

        I am doing my best to instill these criminal values into my son and daughter.

        My wife is a lost cause. She is always critical of me for saving value junk.

        Right now I am replacing an old electrical lawn mower’s burnt out motor with a old dishwasher motor! (Yes, some old millwright and electrical skills are being used.) The new old electrical lawn mower will now run so quietly that you will wonder if it is turned on!

        Sadly, I had to retire when I was 47. Legally deaf and blind. That was 18 years of freedom ago. Enforced long summers at the cottage. Sadly no longer entitled to any holidays or vacations. Often don’t know what day of the weekend it is.

        But it is really nice to know I have some good wcriminal company like you and VanDownByTheRiver!

      • Lisa_Hooker says:

        Keep the potatoes separate from onions/garlic and they will keep longer.

        • Auld Kodjer says:

          Favourite comment of the year. Keeps me grounded.

          [Same is true for central bankers and politicians]

    • IdahoPotato says:

      Debt Freers lie myself still need to purchase health insurance for sub-optimal healthcare and pay property taxes bid up by speculators all around.

    • Lisa_Hooker says:

      There is a reason that Debt Free people are referred to as “deadbeats” in the financial industry.

  16. James Levy says:

    Two factors are critical here: this is now a process completely shielded from any “free market” mechanisms or constraints; it is a political process, with the Treasury and the Fed working assiduously to get Trump re-elected. We have a system of privatized profit nestled in a framework of central control over money and interest rates. The old paradigms of “apolitical central banking” and open market determination of interest rates, however true or fake they might have been, no longer apply. The quicker we all adjust to this new reality, the better we will understand what is happening.

    • Wisdom Seeker says:

      James, the more I learn about the present, the more I go back and recheck my understanding of history, and the more I conclude that things haven’t really changed, it’s just that the corruption is more obvious now.

      Not sure if it was always obvious, and I just see it more clearly now? Or maybe it is the modern media making more information readily available to those willing to look.

      • WES says:

        Wisdom Seeker: You are right about the level of corruption! We are at new highs/lows! What once was criminal, Congress has made legal!

        Despite history”s lessons, I often do wonder if it really is different this time!

        I do have to wonder if down the road historians will come up with a “Real Money/Paper Money” or “Real Money/Fake Money date to mark our transtition from “Reality to Unreality” or “Real Wealth to Fake Wealth” like AD/BC?

        • Wisdom Seeker says:

          I think the real money to fake money transition is already well-established as August 15, 1971, when Nixon took the US (and thus the “Free World”) off of the Gold Standard.

          So currently we are in the year 48 FC (“Fiat Currency” era). Maybe 49 depending on how you want to count years.

          A large fraction of today’s mental anguish over large debts and deficits is due to cognitive dissonance between economic expectations and principles from the Gold Standard era, and the realities of a Fiat Currency system.

          Despite the absolutely fundamental change in the monetary system at the root of the economy, the economic theory was not revisited to ask “hmm, what changes now”? And the textbooks were never rewritten. That’s one of the key proofs that economics isn’t a true science. It’s like they’re still doing old-style alchemy in a world now made of atoms and not substances, and failing to develop modern chemistry. Or maybe economists are more like mathematicians trying to derive proofs based on Euclidean geometry, in a world where straight lines no longer exist…

  17. Old-school says:

    The Fed implemented the wealth affect which is inflating asset values which doesn’t increase future cash flows. Buffet is smart enough to know that there are risks with purchasing assets at current prices so he is sitting on $120 billion in cash hoping that the opportunity cost of waiting is worth it.

    It’s pretty remarkable that he has achieved 10% returns over last 10 years while accumulating this cash.

    • Joe Lalonde says:

      He could buy a city and have the citizens pay him rent.
      Or buy 120 million politicians.
      See if Greenland is available for purchase now.
      So much opportunities…
      Or wait for a crash and really clean up.

    • RD Blakeslee says:

      Paulo, if you’re interested, ask Wolf for my email address – you might be surprised how far ahead one can be self-sustainable in place.

  18. Crush the Peasants! says:

    This is Fed manipulation, and not reflective of market sentiment.

  19. Review of charts of yc2yr may apply the current situation to the 94′ reinversion, which never got off the ground, and started reinverting which led to the 2000 market break. 94′ was the bond massacre, while the trend in lower bond yields still had much further to run, in the present context that event may express itself in a collateral or dollar issue. Since there is really not much downside left to yields, or room to expand the treasury bond market (without placing that paper on cb balance sheet, see below) while the rate of corporate issuance is growing. In 16 it seemed that THEY might want money to come out of stocks and into treasuries (fiscal stimulus) now that deal is off and Repo madness says it is back to stocks, double time. Stocks up 250% 95-00′. A lot of that had to do with technology. The action this time might be the other way, like Japanese markets in the deflationary era.

  20. NARmageddon says:

    Excellent article. I will go one step further and state outright that yield curve inversion is a completely man-made event, namely Wall St attempting a front-running of the FRB (Fed) for fun and profit.

    There is nothing “natural” at all about the yield curve inverting, and YCI is not some stone-tablet economic indicator being handed down by the invisible hand of the gods of economics atop of some mountain. But TV commentators and Wall St pundits have breathlessly and endlessly lied about the nature of YCI for so long now that the general public is completely misinformed and think that it is a natural and organic predictor of economic troubles ahead.

    YCI is and always has been caused by betting: Wall St selling the short end and buying the long end, in anticipation that the central bank will buy down the short end rate even more and thereby increasing the value of the long end bonds that will as a result again yield higher than the short end.

    But what happened this time is that J. Powell and the FRB/FOMC said NO PROFIT FOR YOU to Wall St. And FRB/FOMC backed up their words by doing exactly what Wolf described: Sell (or rather “not reinvest”) at the long end (to bring price down and rates up) and invest the proceeds at the short end (to bring price up and rates down).

    Key in all of this is that FRB has large holdings (google:WSHOMCB, at 1447B last week) of MBS that are nominally “long end” BUT gets repaid (and even pre-repaid) continuously, so that there is a natural runoff that means FRB does not have to “sell” anything outright in order to achieve downward price action (increased rates) at the long end. By re-investing more at the short end and less at the long end, FRB is directly preventing Wall St from profiting from the attempted inversion.

    And as a worthy side effect, mortgage rates will also rise and prevent the housing bubble from getting bigger, although I think it is too late to engineeer a slow deflation. The bubble will burst anyway.

    • Wisdom Seeker says:

      NARmageddon, this was very insightful. I’d learned that in the past the yield curve inverted because forward-looking investors anticipated poor returns from stocks and increased the relative bid for bonds, thus driving yields down. But of course investors have proven they aren’t that smart! And this hypothesis doesn’t explain the timing difference between YCI inversion and stock market peaks.

      Another hypothesis would be depletion of longer-term bond issuance during a boom period. Keynesian-minded business and government leaders are supposed to deliberately run surpluses to reduce debt and build a safety cushion. That reduction in loan demand should also drive down longer-term yields. But of course we haven’t seen a genuine Keynesian surplus in over 50 years!

      Now, since the 2008 recession the meme is out that “YCI -> Recession”. Once something is common knowledge it stops working, but it also means that today it’s entirely plausible for regime-change-seeking market participants to deliberately push a bond bubble (“for fun and profit”), luring in momentum investors to drive the bubble to YCI (and hold the bag). The YCI could then trigger a recession through self-fulfilling-prophecy effects even if there’s no real mechanism.

      I’m still partial to the hypothesis that we have YCI today not because of domestic growth concerns but because the rest of the world can’t sustain a positive yield on debt. Central banks worldwide are generating digital-mountains of soon-to-be-worthless fiat credit to extend-and-pretend. Negative local yields and grim currency prospects would drive sane investors to borrow in crap currency and lend in US$. Potentially a double-win from both the positive yield and the likelihood of US$ strengthening against devaluing local currency.

  21. Iamafan says:

    What is there left to believe in the Yield Curve?

    The Fed owns about $4 Trillion of Long Term Gov’t. securities (with a plan to rollover everything) and now is buying $60 billion a month of shorter term T Bills in addition to deploying almost half a trillion a week in Repo. (I’m computing the Balance Sheet will print 215.160B in Repo balance, but will keep silent on deploying 419.452B in repo for the week.)

    What could the Yield Curve be saying? That it is so manipulated and it’s beautifully distorted?

  22. Just Some Random Guy says:

    Didn’t the magic inversion happen a few months ago? And wasn’t the end of the world supposed to happen shortly thereafter? That’s what all the CNBC talking heads told me anyway.

    So I guess muhRecession is back on?

    • NARmageddon says:

      NO, there is nothing magical about yield curve inversion. YCI is a bet made by Wall St, no more and no less.

      J.Powell and Fed is telling the Wall St yield-curve-inverters to go screw themselves. Oh, and Fed MBS runoff will increase mortgage rates and deflate the housing bubble, too. All good. God, I hope this is what Powell is thinking. It is the right thing to do, for certain.

    • WES says:

      JSRG:. No, the thought police have just postponed your “muhRecession” court appearance to a yet to be determined future date!

    • Gandalf says:

      The yield inversion prediction of recessions is a real thing. Yes, it is caused by financial speculators betting on SOMETHING happening, and that something is the lower interest rates that always come about when the economy takes a dive.

      The historical truth of this indicator has been tracked back all the way to 1917, when it inverted in the midst of WWI. That was the first time large sums of long term (10 yr) Federal debt came into play, which is what made this yield inversion a useful indicator



      So, I don’t think it’s a fake indicator. The Fed’s attempts to suppress yield inversions are likely to just prolong and increase the excess speculation and bad debt that ALWAYS go with boom times

  23. Old-school says:

    I really like the following companies to boost income.

    PETS…rock solid balance sheet, no debt …buy when div gets to 6% that’s $18 stock price.

    SKT… REIT with 20 outlet malls. buy when div gets to 9% (almost there). It’s credit is rated bbb. They held up pretty good during last recession.

  24. Old-school says:

    I am in the sweet spot between 59.5 and 70.5 where I have a lot of flexibility in IRA accounts.

    One loophole in tax code is REITs don’t pay income tax on dividends and if REIT is in an Roth IRA or if you can tap your IRA below income tax threshhold you can have a own real estate completely income tax free.

  25. Implicit says:

    The fed and the gov are walking from each side of the high wire. “one side is ice and the other is fire” Lleon Russell)
    If the rate gets too heated up too high, which seems to be around 3.5-3.50 on the 10 yr, the debt defaults will be huge for the gov and many companies, The economy blows up big, and we have to burn to death very quickly,
    If it goes too low and stays there the economy freezes like Japan, but regardless it is a slow insidious decline like Japan.
    They have chosen Japan,

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