Tag Archives: yield curve

Yield Spreads; Gold Bugs Avert Eyes…

Better yet, look square at it because this is the market, not ideology, making the rules.  I don’t want to pile on (ref: Tom McClellan’s guest post) but this is extremely gold unfavorable with yields up and short term yields up way more.  Insert here the boiler plate about not taking any one day’s reading in a vacuum… but then consider the spreads have been degrading nearly every day for a week now.

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10 & 2 year yields, from Bloomberg

Gold will get where it is going one day, but not until fundamentals come back in line.

Yield Curve Snapshot

Again with the disclaimer not to take one day’s reading in a Hoover… the curve is dropping with yields positive, which could favor a stock bounce and is theoretically not gold positive (yeh, I know it’s up pretty good in pre).

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10yr & 2yr yields from Bloomberg

Oh and regarding stocks, this headline doesn’t hurt either…

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A Curve Ball

Guest Post by Michael Ashton

[edit] I have to claim credit as being one of the first and maybe loudest when it came to talking about yield spreads before the recent drop in the yield curve.  But Mike Ashton has professional experience dealing in the credit/debt markets as I recall.  His post is very interesting to a geek like me, and should be to all market players because the interplay between Treasury rates is key; even more so than any individual markets we may be micro managing.  So many things spring from interest rate relationships.

I saw a story on MarketWatch on Monday which declared that the “Treasurys most sensitive to rising interest rates” had been ditched by investors while those investors instead were “gobbling up longer-term securities,” causing the curve to reach its flattest level since 2009. I thought that was interesting, since an inverted yield curve is a valuable indicator of potential recession.[1]

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Is the Yield Curve Really Flattening?

There is a lot of talk now about a flattening of the yield curve.  This talk has been among the most intense right here at the website you are reading at this moment.  A flattening curve is commonly viewed as bad for gold, and according to Mark Hulbert, is an indicator of a coming recession.

Why you should care about the yield curve

But is the curve really flattening or is this all hype based on Janet Yellen’s press conference comments?  Here is a chart the likes of which we have been using in NFTRH for many months now, the 30 year vs. the 5 year yield.

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MarketWatch shows a similar chart in its article…

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Yield Curve’s Message for GDP

Guest Post by Tom McClellan

10-year and 3-month yield spread versus relative strength
February 21, 2014

One of the really fun leading indication relationships involves the yield curve, the spread between interest rates on similar securities across different maturities.  The real yield curve has too many data points each day for visual modeling, and so a simplistic model of the yield curve can suffice to make for easier modeling.  In this week’s chart, the role of the entire yield curve is portrayed by the spread between the 10-year T-Note yield and the 3-month T-Bill yield.

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