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US Treasury Bond Market Yield Curve

Interest-Rates / US Bonds Apr 18, 2023 - 09:49 PM GMT

By: Nadeem_Walayat

Interest-Rates

That was one hell off a drop in the 2 year yield yesterday, went straight from 5% to 4%. Now US rates are on par with where they were when the S&P was trading at 4200, of course it's not as simple as that, the rate fell in response to the Fed bailout of the banking crime syndicate. Still this should be positive for stocks.


(Charts courtesy of stockcharts.com)

This chart shows how the US yield curve has evolved since the start of the year where yesterday (pink) yields fell more sharply at the shorter end than the longer end resulting in a narrowing of the inversion. between the 2 year and the 10 year. For a clearer [picture focus on the red (12th March) vs the pink (13th March) curves to see the magnitude of the change.

What does this mean?

It means the market is not only discounting no further rate hikes but also several rate CUTs this year, Is that going to happen? I doubt it! I still think the Fed will raise rates until the Fed funds rate exceeds CPI, so maybe 1 or 2 more 0.25% rate hikes.

So interest rates have taken a nose bleed dive as the market correctly discounts the fact that what the Fed fears most is a financial crisis that could easily spiral out of control and thus seek to do their utmost to prevent a repeat of the near death experience of 2008. Which is another reason why all those bandying around charts of 2008 expecting a rerun during first 2022 and now 2023 are going to be disappointed. The Fed of pre Lehman's collapse no longer exists, the Fed since is determined to never witness a repeat of 2008 and hence the weekends shock and awe announcement that caught the bears by surprise, we'll what did they think the Fed was going to do? Let 2008 repeat?

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By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2023 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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