What Does The Yield Curve Yield?

The opposite of what most other market participants believe. Most market participants anticipate the FED to tighten, as they have indicated, indicating economic growth and higher interest rates. In such a scenario you should see spreads widening. Instead, we are beginning to see a trend reversal and yield curve compression since the start of this year.

Does the bond market see something that most other market participants do not?

I believe so. In fact, we anticipate the yield curve to flatten further over the next 24 months and possibly invert as the bear market of 2014-2017 enters the picture. As we have indicated on this blog so many times before the bear market will usher in a severe recession, forcing the FED to flood the market with further liquidity. In such an environment, we would anticipate the long end of the curve to head lower. Much lower.

If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.