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Yield Curve Replies |
nodoodahs
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 Posted: Fri Sep 30, 2011 2:04 pm Post subject: |
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| nodoodahs wrote: | Barring a short-lived flattening from a catastrophe, I can't see the curve getting less steep until the Fed starts a raising campaign on the FFR, and even then only once they really get into it.
Look for another year-plus of steep curves ... |
Looks like the catastrophe flattening the curve! Some idiots are going to give "Op Twist" the credit, I'm sure.
But, still historically steep.
And, still expecting it to stay that way until the Fed starts raising the FFR.
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rffrydr
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| Posted: Mon Sep 26, 2011 9:50 am Post subject: |
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That indicator was misleading to say the least.....though even hi-yield proves the course.
Getting flatterer:
http://stockcharts.com/freecharts/yieldcurve.html
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nodoodahs
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| Posted: Fri Jul 22, 2011 2:11 pm Post subject: |
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Barring a short-lived flattening from a catastrophe, I can't see the curve getting less steep until the Fed starts a raising campaign on the FFR, and even then only once they really get into it.
Look for another year-plus of steep curves ...
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rffrydr
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| Posted: Fri Jul 15, 2011 8:46 am Post subject: |
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Not flat, curve and carry continue to support:
| Quote: | | There are no cases for the past 12 years when a yield curve this steep did not lead to positive (red bubbles) returns for the risky bonds. Having a rising correlation of returns helps. The environment three months ago is highlighted with a blue bubble and the current environment is highlighted with a blue bombsight. |
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rffrydr
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| Posted: Mon Feb 28, 2011 9:39 am Post subject: |
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The best of all possible depressions:
The yield curve: flattening again
Published: February 28 2011 09:56 | Last updated: February 28 2011 12:54
| Quote: | The bond market seldom lies, so what is it trying to tell us? The US yield curve, as expressed by the spread between 10- and two-year yields, entered this year as steep as it has ever been, at about 2.9 percentage points. This makes it easy to make money by borrowing short and lending long, as banks do. It also implies that a second recessionary “dip” is not on the way, as the yield curve flattens, and usually inverts, when a recession is on the way.
But the curve has flattened by about 20 basis points this year, and history suggests that this will continue. Indeed, only extreme actions by the Federal Reserve kept it this steep this long. Evolution Securities shows that the steepening that started just ahead of the last two US recessions, from 1989-92 and from 2000-03, had played out by this point. The difference this time is that the curve, having started to flatten, steepened again once the Fed launched into its QE2 bond purchases last autumn. A “bull steepening,” driven by lower short-term rates, was followed by “bear steepening,” driven by higher long-term rates while short-term yields stayed calm.
Looking at the link to the economic cycle, Société Générale shows that steepening generally ends about two years after the ISM employment index hits rock bottom. It did so two years ago.
Add this evidence to the record steepness, and the record endurance of this steepening cycle, and it is close to a racing certainty that the next phase, coming soon, will be a “bear flattening”; the curve will get flatter thanks to higher short-term yields. Any strength in ISM and non-farm payroll data, due this week, will make this more likely. Stepped up action from the Fed can alter this. But the bond market is ready and braced for the Fed to tighten. If the Fed does not oblige, bond traders may yet do the job themselves and push up short-term rates. |
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nodoodahs
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| Posted: Thu Aug 19, 2010 3:06 pm Post subject: |
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While a move to "only" 220 bps or so between the 10s and the 1s is, factually, a "flattening," I wouldn't be crowing about it or hitting the "bank earnings panic button" yet.
It's still much, much wider than even the majority of historic "steep curves" since the 1950s.
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rffrydr
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rffrydr
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| Posted: Fri Aug 13, 2010 4:58 pm Post subject: |
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rffrydr
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rffrydr
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nodoodahs
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| Posted: Tue Aug 10, 2010 1:30 pm Post subject: |
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When the curve is flat to inverted, overall the steepening happens because the lower duration end collapses while the higher duration end pretty much stays put. The exception is a dramatic collapse where the entire curve moves down! Given that the higher end pays you yield capture, it makes more sense – given equivalent amounts of leverage – to play a steepener by just being long on low duration, rather than playing a spread. Especially during a collapse, where shorting the long end just means paying out yield and paying out capital losses!
When the curve is very steep, overall the flattening happens because both ends move. This is the “conundrum” wherein the higher durations tend to edge down into a tightening cycle, while the lower durations climb. Because a flattener is short on the lower duration, it is forcing you to pay yield while getting capital gain, but not much capital gain, because of the low duration. So overall it’s of limited benefit. Meanwhile, if you’re just long the higher duration, well, you’ve got yield capture and limited capital gains.
Ergo, I think that for most speculators, playing the flatteners and steepeners through direct long positions makes the most sense.
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rffrydr
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rffrydr
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| Posted: Mon Apr 26, 2010 9:06 am Post subject: |
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They keep prognosticating it away:
| Quote: | Brian Gilmartin
Bove on Citigroup
4/26/2010 9:37 AM EDT
xxx Bove was just on CNBC saying that he now thinks Citi has a $0.70 of "normalized earnings" capability exiting the crisis.
My first thought was "maybe". We track earnings estimates for C, and the consensus isnt yet there on the big fianncial.
Even with the blow-out q1, C's eps estimates for q2, q3 and q4 '10 didnt change much (i'm thinking that analysts arent modeling the same trading / banking gains from q1) and the consensus estimate for 2012 is still just $0.47, not even the old $0.50 in normalized eps.
We sold half our C, last Monday, the morning earnings were reported and will sit on the other half.
If the stock and bond marekts remain robust, C could get there in terms of the numbers, but the majority of analysts dont seem to believe it yet. |
Bank analysts as the optimists here?
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rffrydr
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| Posted: Tue Apr 20, 2010 3:52 pm Post subject: |
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RF showed a $750 mln increase in average taxable security holdings in Q1 2010. This comes on top of a $3.884 bln increase in Q4 2009.
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rffrydr
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| Posted: Thu Apr 01, 2010 9:50 am Post subject: |
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The other de-leveraging:
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