Bonds 01 (May 08 - Aug 10)

[kennynah]

am glad u discovered possible answer to your own question nothing beats the "OIC!" feeling

[winston]

Dear All,

As there was quite a bit of discussions on bonds, I have split out those discussions and put it into this new thred.

So please do feel free to post any discussions and articles on Bonds into this thread.

Take care,
Winston

[sidney]

this is called an inverted yield curve... it is a signal that a possible recession is coming on.

people want to be paid nearer than further out, bcos further out is cloudier comparatively given all the uncertainty..

whenever the nearer end bond yields higher than farther out bonds, the economy is almost certainly sliding into a drastic slowdown...

Dear all, do u have anymore insights on inverted yield curve? My lecturer also mentioned downward sloping yield curve is the beginning of recession. Moving forward, what's probability S'pore will kana recession due to the inverted yield curve as we observe now?

[millionairemind]

Sidney - Mohamed El -Erian touched on the inverted yield curve for US treasury extensively in his book "When Markets Collide". You may want to pick it up.

I don't pay attention to Singapore bond's market. It is US market's inverted yield curve that will affect the whole world.

[sidney]

Got it. Thanks MM

[kennynah]

sydney, why dont u tell us what you know about inverted yield curve?

[la papillion]

yea sidney, i also wish to know more

[sidney]

sydney, why dont u tell us what you know about inverted yield curve?

Duh! My knowledge of koyok selling stops here. Hmm i'll go find out more and update all if i learnt anything abt inverted yield curve.

[Chiron]

Let me try with my paltry knowledge. Treasury (or bond), the longer the term, the yield is supposed to be on increasing trend as Treasury yield is supposed to take inflation into account. The 3 main periods are 2, 10 and 30 years. 2 year note follows more closely to FED fund rate while 10 follows the inflation outlook. There was a period think last year when 2 year note yield at abt 4.5% (close to FED fund rate) while 10 year note was below 4.5%. It means that the treasury (or bons) market expect inflation to drop in the longer span. Now inflation drops typically means recession ahead as only a recession will result in a deflation typically. Hence the yield curve is inverted, which means possible recession, even though last year the mkt was running in a bull rampage.

2 year yield can also tell us the possible FED fund rate. Currently at 1.6%, fund rate at 2%, means they expect FED to cut rate. So fund rate and 2 year yield follow each other, either as leading or lagging indicator, depends on how one look at it.

Correct me if I am wrong.

[sidney]

Hi Chiron, thank you for the explaination