inverted yield curve

free4440273

recession on its way. some are saying, 'it's different this time'. myself? a rose is surely a rose...

isasmurf

What?

Has this anything to do with moneysaving?

deemy2004

free4440273 wrote:

recession on its way. some are saying, 'it's different this time'. myself? a rose is surely a rose...

Its temporary... there is going to be a sysmic shift in the bond markets sometime during 2006... Not a good time to hold floating bonds !

Stonk

isasmurf wrote:

What?

Has this anything to do with moneysaving?

It means you get a better interest rate for short-term savings than long-term tied-up savings, at the moment. Then again, retail banks' rates (i.e., those of relevance to the vast majority of the public) do not reflect money-market rates so closely or quickly, and while you may see the inversion in LIBOR rates, gilts, etc, you probably won't notice it at your local bank or building society.

That's what it means to me, anyway.

free4440273

me thinks a collapse of the corporate bond market could well be with us in 2006...

free4440273

the inverted yield curve is now almost with us - say hello to mr recession. And this one is going to be nasty and unprecedented surely. The excesses of the dot-com bubble were never really deflated; so now we suffer the consequences...

EdInvestor

The excesses of the dot-com bubble were never really deflated; so now we suffer the consequences...

Really? Last time I looked, the FTSE100 still hadn't recovered to its peak in 1999. :rolleyes:

free4440273

in that case the inversion in the yield curve is somehow 'wrong' this time - 'this time it's different'...yeah, right.

ReportInvestor

Well it might be.

There are incredible downward pressures on yields generally. The FSA puts pressure on pension funds and insurers to invest in "safe" gilts.

The baby boomers worldwide are desperately searching for retirement income.

As a result yields have fallen. Take a look at PIBs. These now pay from 5.3% to 5.9% (compared to 8% not very long ago), have wide spreads, aren't easily tradable in a crisis and there is not even any obligation on the building society to pay you anything if it doesn't want to :eek:.

But PIBs, like Corporate Bonds, can be put into a shares ISA and you can get the income tax free.

So perhaps we are back to the baby boomers for the long term explanation.

free4440273

yes, that is a possible explanation. However, i stand by my original post at the very top of the thread - recession now on its way (the coming 'collapse' in the US housing market will bring this nearer, US consumers are now going to feel the REAL cost of financing their mortgages). And the Fed ain't finished raising rates yet (BoE will soon RAISE rates, not cut them as many seem to think).

cloud_dog

I'm sure there will be 'corrections' in the near future but am not convinved a recession is round the corner (not yet anyway).

Did find this bit of commentary that indicates that perhaps the inversion curve may have / be abating somewhat:

http://mortgages.interest.com/MoneyTalks/Article/951/

We will see.