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I don't know how something so skewed as Treasury yields could offer anything of analytical value at a time when the Fed is giving away money and parking it at the short end in order to motivate takers. Comparing the current moment to August 1982, no matter how true, technically speaking, is in my opinion misguided and deceptive.

I.B. Wright

I think your analysis is very guided and very ceptive.

Paul Teetor

Thank you very much for this posting. It'll be buying 10-year Tsy futures and shorting the 5 user futures. My historical data shows that spread at an extreme, too (after detrending).

Paul Teetor

Uh, that should be "year", not "user". Darn mobile phone

Graham Turner

that's a very disingenuous observation and one unworthy of you. of course GDP is coming back and smartly no doubt
but that has no correlation with stockmarket returns. With 51.1% bulls and only 15.6% bears , its hardly "the death of equities"

random roger

seems to me that this yield spread has preceded the beginning of every super bull market in equities


a number of people refer to 2-10 as a measure of steepness as well; worth looking at this

David Merkel

One other note -- when the yield curve is steep, value stocks tend to do better than growth stocks.


I think your implication was wrong. The inverted yield curve may indicate the recession ahead, not the steep yield curve.

"According to literature from the NY Fed's website, the yield curve is defined as, "the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill." On a historical basis it has been "a valuable forecasting tool...in predicting recessions two to six quarters ahead.""


Looking at the data, the VERY steep yield curve has generally preceded periods of equity strength. While many other indicators may point to a market top, this one says the party may last for a while before a top is in place.

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