Thursday, June 22, 2017

The post-hike flattening yield curve

 - by New Deal democrat

An inversion of the yield curve has always signaled at very least a steep slowdown, and usually an oncoming recession. With the Fed hiking short term rates, where do we cut and now?

Below are two graphs, using the Dynamic yield curve tool from In both cases the dark red line is the yield curve as of several days ago (post-hike). The light red line is the previous yield curve from the beginning of this year (first graph) and from last month (second graph):

Note that the curve is pivoting around a point between the 2 and 5 year yields, at about 1.5%. 

At this point, the yield curve is still positive, but if the trend continues, another two rate hikes should be enough to invert at least part of the curve.