US Bond Market Yield Curve Inversion Current State

Interest-Rates / Inverted Yield Curve Sep 03, 2023 - 11:00 PM GMT

The yield curve is the Ten Year yield Minus 2 Year Yield - What it shows is when short money is more expensive (higher rates) then long money, why is that? Forward economic weakness thus lower forward rates? Yes that is a valid argument but I suspect that in large part is the WRONG conclusion, it is after all the consensus view, what the econofools regurgitate across MSM, long rates are lower because the market is discounting future interest rate cuts is WRONG!

Maybe if they weren't prone to following the herd they would realise that the government wants lower longer term interest rates so that it pays LESS interest on the debt it issues! That and market rates for loans tend to be more sensitive to the short end so if the government wants to reduce economic activity to curb inflation then the yield curve inverts by design and not as an act of god to warn of a recession. Understand this the bond markets are very heavily manipulated where the central banks stand ever present to intervene to unlimited extent to ensure the bond markets do exactly what they want them to do so that the government can continue printing debt whilst paying a low interest rate.

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By Nadeem Walayat

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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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