20 yr vs. 30 yr Yield Curve

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dockinGA
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20 yr vs. 30 yr Yield Curve

Post by dockinGA » Thu Oct 28, 2021 12:27 pm

It sounds like the yield on 20 year treasuries are now higher than 30 year yields as of today. Of course we always hear of a yield curve inversion in the 2 yr vs. 10 yr range is a great predictor of an upcoming recession, and I can understand in some ways why that is a good indicator/predictor of an upcoming economic contraction. But, what are the implications of an inversion in the yield curve this far out, hypothetically assuming that the spread continues to grow beyond the current ~.01%? Does it indicate economic issues that will set in further in the future than the usual 2/10 inversion? Does it indicate that the issues will last longer? Does it indicate nothing at all?

Just a random question I've been wondering about for the past few months as the yield curve is flattening.
dockinGA
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Re: 20 yr vs. 30 yr Yield Curve

Post by dockinGA » Fri Dec 03, 2021 7:43 am

dockinGA wrote:
Thu Oct 28, 2021 12:27 pm
It sounds like the yield on 20 year treasuries are now higher than 30 year yields as of today. Of course we always hear of a yield curve inversion in the 2 yr vs. 10 yr range is a great predictor of an upcoming recession, and I can understand in some ways why that is a good indicator/predictor of an upcoming economic contraction. But, what are the implications of an inversion in the yield curve this far out, hypothetically assuming that the spread continues to grow beyond the current ~.01%? Does it indicate economic issues that will set in further in the future than the usual 2/10 inversion? Does it indicate that the issues will last longer? Does it indicate nothing at all?

Just a random question I've been wondering about for the past few months as the yield curve is flattening.
This one got no comments from anyone else, but in the month or so since I posted the difference between 20 yr and 30 yr yields has continued to expand. Also, the spread between 10 yr yield and 30 yr yield has continued to narrow, with a general flattening of the curve on the long end. Still not sure what this means, but I do wonder if this is the 'smart money' dumping into LTT's prior to a rise in short term rates that causes a collapse in equity prices? We are truly in uncharted waters.
murphy_p_t
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Re: 20 yr vs. 30 yr Yield Curve

Post by murphy_p_t » Fri Dec 03, 2021 8:19 am

It's an interesting observation. Seems counterintuitive with all the talk of inflation?
dockinGA
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Re: 20 yr vs. 30 yr Yield Curve

Post by dockinGA » Fri Dec 03, 2021 8:30 am

It's definitely counterintuitive. But who knows what the future holds. It will be interesting to continue to watch how the yield curve moves over the next few months, especially if the Fed completes tapering early and then quickly increases short term rates. Personally, I think that would be the end of this bull market run, but we'll see. If the Fed does raise rates and it does in fact look like it will induce a market crash, I wonder what they will do? Cave like they have in the past and reduce rates back to zero, and accepting inflation that runs up close to 10%? Or will they have the backbone to hold firm with rates to tamp down inflation, and allow the markets to finally fall back to 'normal' valuations? Anyway, I'm not sure at this point there is a good outcome on the horizon for investors regardless of what the Fed does or doesn't do.
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