Replies

Agree media has no idea of what is happening to yield curve & attempting to talk the market down

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

May I attempt to explain for those less familiar with the financial markets?

Bond yields get lower when there is increased demand for the bonds. Yield is a combination of face value and nominal interest rate; so the easiest way to think about it is if lots of people are begging to lend you money, you will pay less interest.

Export sensitive markets in China and Europe, also burdened by high taxes, socialist policies, ridiculous regulations etc. are getting killed by America ... including Trump's tariffs, as well as Trump's REFUSAL TO CONTINUE SUICIDAL DERP POLICIES LIKE PARIS, TPP etc.

Hence, the rest of the world is slowing down economically.

To STIMULATE their morbid economic systems, and getting less fresh blood infusions from America's veins, the Central Banks around the world have reduced their interest rates to almost ZERO, or even below.

Big money says BYE-BYE to ZERO INTEREST RATES, especially when they can still get about 2% yield from the GREATEST ECONOMY IN THE WORLD.

This is what is driving down bond yields in the U.S. We are THE ONLY GAME IN TOWN.

The "Normal" yield curve has borrowers paying higher interest rates for longer term borrowings. That is natural, because the lender's money is tied up longer and there is a greater possibility of a default before the principal is repaid.

But NO ONE SERIOUSLY THINKS THE USA IS GOING TO DEFAULT on 10-year bonds. So global bond investors, in a flight to quality and yield, have bid up American bonds OF ALL TIME SCALES---which means ALL THE YIELDS (opposite of purchase price) are historically low.

It so happens the 2 year U.S. bond yield temporarily got higher than the 10-year.

In the past, this has frequently (though not always) indicated a recession is on the 12 to 18-month horizon. But that totally ignores the international situation I have just described.

International bond investors are not just seeking interest income and principal appreciation, but also currency appreciation. If they foresee a currency war during the remaining 6 years of the Trump administration ... and one where the globalists have significant control of the United States Federal Reserve ... then they may foresee a major increase in the value of the U.S. dollar vis a vis other currencies, and hence the 10-year Bond becomes extremely attractive.

Keep in mind that ALL BOND YIELDS ARE EXTREMELY LOW. The 10-year is, I believe, at record lows ... hence the inversion of the yield curve.

Note that, contrary to the current financial Press in the U.S.,THIS HAS NOTHING TO DO WITH FEARS OF RECESSION DRIVING THE TWO-YEAR BORROWING COSTS HIGHER. On the CONTRARY: The 2-year yields are also VERY LOW ... just not as low as the 10-year.