Treasury Yield Curve - June 3 2019

[moda0306]

Anybody noticing the "U Shaped" yield curve?

https://www.treasury.gov/resource-cente ... data=yield

The long and short ends of the curve are the best, with the middle dipping in the lowest around the 3 year mark.

Just thought it was interesting... closest thing we've seen to an inverted yield curve in over a decade, if I'm not mistaken.

[pmward]

Every time I look at yields the last few weeks, I can't help but think "wow, that escalated quickly". Bond markets seem completely sold on the fact that we are 6 months - 1 year out of a recession.

[jacksonM]

Seems to me an ideal time for the PP to do well.

I don't know about the rest of you but I think I had my biggest one day gain ever today. Told my wife if we could do this every day it would be better than winning the lottery.

[moda0306]

Every time I look at yields the last few weeks, I can't help but think "wow, that escalated quickly". Bond markets seem completely sold on the fact that we are 6 months - 1 year out of a recession.

How are you getting that timeframe? If rates aren't really low until we get to 2-3 years into the yield curve, how do you conclude 6-12 months?

I could be totally wrong so don't interpret any amount of condescension from my post... just asking.. my bond game is a bit rusty.

[moda0306]

Seems to me an ideal time for the PP to do well.

I don't know about the rest of you but I think I had my biggest one day gain ever today. Told my wife if we could do this every day it would be better than winning the lottery.

Bonds and Gold have done ridiculously well (as has the PP) the last 6 months. Add to that stocks not seeming like a valuable asset class, and I'll just be buying up SHV (correction from SHY) as I save in my buckets. I might even sell some of the lower-yield mid-duration ETF positions I have (3-year-to-10-year) in favor of a barbell of TLT and SHY, but not sure on that.

Still haven't graduated to buying actual bonds...

[pmward]

Every time I look at yields the last few weeks, I can't help but think "wow, that escalated quickly". Bond markets seem completely sold on the fact that we are 6 months - 1 year out of a recession.

How are you getting that timeframe? If rates aren't really low until we get to 2-3 years into the yield curve, how do you conclude 6-12 months?

I could be totally wrong so don't interpret any amount of condescension from my post... just asking.. my bond game is a bit rusty.

Yeah lowest is 2-3 years out, but we start dropping quickly from 6 months to 1 year. The start of a recession is usually months before the deepest part. Starting recession in about one year, and the recession lasting about a year, is what the curve looks like to me. Though, as you alluded to, interpreting the yield curve is more art than science.

[moda0306]

I've also found it interesting that a 5 year treasury will yield me 1.9% but I can get a 5 year CD for 3%. I know hardcore PP philosophy shies away from FDIC insured accounts vs treasuries, I still can't get over when there's a nice spread between the two.

[Xan]

Unless we're talking about so much money that FDIC doesn't apply, and it's money you could wait for in a potential crisis, I agree with you.

[Tortoise]

Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?

[moda0306]

Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?

My example was Ally, which doesn’t require a new account to get that rate. But you could still be right, though I thought banks usually used savings account and 1-2 year cd rates for that kind of stuff.

[whatchamacallit]

30 year (1.98) is lower rate than 1 month (2.08) today

[Smith1776]

I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.

[jhogue]

Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?

My example was Ally, which doesn’t require a new account to get that rate. But you could still be right, though I thought banks usually used savings account and 1-2 year cd rates for that kind of stuff.

Bankers don’t have to lose money to tempt you with a higher-rate CDs. That “hot” 5 year CD rate at 3% is doubtlessly covered when that same banker originates a mortgage loan at 4% or a maybe a HELOC at 5%.

I had the same question when my local banker recently dangled an 11 month CD @ 2.25% with the option to add or withdraw any amount up to the FDIC limit. When I asked him how he could beat the yield on a one year T-bill by 50 basis points, he replied succinctly: “It’s all about risk management.”

[jhogue]

Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?

My example was Ally, which doesn’t require a new account to get that rate. But you could still be right, though I thought banks usually used savings account and 1-2 year cd rates for that kind of stuff.

Bankers don’t have to lose money to tempt you with higher-rate CDs. That “hot” 5 year CD rate at 3% is doubtlessly covered when that same banker originates a mortgage loan at 4% or maybe a HELOC at 5%.

I had the same question when my local banker recently dangled an 11 month CD @ 2.25% with the option to add or withdraw any amount up to the FDIC limit. When I asked him how he could beat the yield on a one year T-bill by 50 basis points, he replied succinctly: “It’s all about risk management.”

[Datura]

I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.

Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.

[Xan]

I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.

Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.

Antifragility is the new cool. At least around here...

[Smith1776]

I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.

Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.

We're on the same wavelength. I am, and always have been, an unusual fellow. I don't mean to say that I'm special, but I am definitely unusual.

As an example, I point out to many of my friends (at least those that work in finance), that the reason why diversification away from digital assets isn't preached, is simply because a major digital bomb on our wealth hasn't happened yet. There is a human tendency to reason by analogy rather than by first principles. When you reason by analogy you take something familiar and either transpose or extrapolate. In this case people extrapolate into the future, and don't realize that the fundamentals of wealth have changed.

Digitization is a common denominator. All of the risk "eggs" are in the digital basket. You are taking a massive risk by holding all of your wealth in this one form. When I try to point this out, people give me funny looks.

With the PP you get protection with having at least some of your gold holdings in physical form. It's the ultimate in anti-fragility. And that's why I like it.

[Datura]

Today I've been reading a lot of articles this morning about negative ZIRP/NIRP and its potential consequences, and in short nobody knows what it will do long term, but everyone is doing it (including the USA soon, according to president Trump), and it's propping up the entire stock market and financial system at present, again with no exit strategy and unclear long term ramifications.

I have only the understanding of a well read amateur, but the fact that even experts in the field are extremely uncertain about it makes me extremely paranoid, to the point that I'm seriously considering making the switch in January. I have lots of plans in life and I don't want the social experiments of some random economist I've never heard of to get in the way.

[dualstow]

.. I'm seriously considering making the switch in January.

Making the switch --

[ochotona]

.. I'm seriously considering making the switch in January.

Making the switch --

Switch to what???

[dualstow]

Did datura answer, and then his post vanished? Or am i going nuts?

[ochotona]

Gender switching?

[dualstow]

Did datura answer, and then his post vanished? Or am i going nuts?

It was there earlier. I read it. Something about transitioning from 33/33/33 Stocks/Bonds/REITs to a modified PP.

Ah yes, thank you. ‘Thirds’. I remember now.

[boglerdude]

NIRP is good, means there's a savings glut. Japan/germany are rich countries with a high quality of life. Dont be mad cuz you cant have the risk free return that you used to get with high population growth

http://bilbo.economicoutlook.net/blog/?p=31715