Have they ever gotten it right? Looking at them this morning, peaking north of 4% in January '24 then normalizing around 3% through '33. I know the times of sub 1 are long gone, but this is going to be a huge shift. Pricing of whatever you're trying to finance is going to need to come down dramatically before any sort of financed investment makes the sort of sense it has the last few years. Gonna slaughter jobs, commodities...

So back to my question, have the curves ever gotten it right? I can't recall them having done so in the last 10'years...

Although yield curve inversions are good predictors of recessions, they're not perfectly correlated and the exact relationship isn't completely understood.

RockOn said:

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Although yield curve inversions are good predictors of recessions, they're not perfectly correlated and the exact relationship isn't completely understood.

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Uh, from Barrons:

"In a recent study of yield curve inversions, BCA Research found that the gap between 2- and 10-year yields has inverted before seven of the past eight recessions, with no false signals.

The gap between 3-month and 10-year yields has a better record, calling all 8 recessions without a false signal."

LMCane said:

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RockOn said:

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Although yield curve inversions are good predictors of recessions, they're not perfectly correlated and the exact relationship isn't completely understood.

---

Uh, from Barrons:

"In a recent study of yield curve inversions, BCA Research found that the gap between 2- and 10-year yields has inverted before seven of the past eight recessions, with no false signals.

The gap between 3-month and 10-year yields has a better record, calling all 8 recessions without a false signal."

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No false signals eh? Just gonna leave out 1965?

I stand by my assertion of "not perfectly correlated".

RockOn said:

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LMCane said:

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RockOn said:

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Although yield curve inversions are good predictors of recessions, they're not perfectly correlated and the exact relationship isn't completely understood.

---

Uh, from Barrons:

"In a recent study of yield curve inversions, BCA Research found that the gap between 2- and 10-year yields has inverted before seven of the past eight recessions, with no false signals.

The gap between 3-month and 10-year yields has a better record, calling all 8 recessions without a false signal."

---

No false signals eh? Just gonna leave out 1965?

I stand by my assertion of "not perfectly correlated".

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So what's your actual point?

that we are not going to be in a recession anytime soon

even though the yield curve has now inverted twice this spring/summer?

The data from past Forward Curves shows that for the SOFR/LIBOR curves, they are relatively accurate for the next six months, and then it gets pretty unreliable. While it's a good tool for investment analysis, budgeting and pricing hedging products, it is changing by the hour so don't put too much weight on the projections.

I have been tracking the Forward Curve rates (via Chatham Financial) for the last couple couple of months : the primary change is that the rates level off about 100bps higher than two months than two months ago.

The only major volatility I have observed was the day of the Fed announcement had rates spiking to 4.50% over 12 Months. After the Fed had made the announcement it leveled back to 4% - I assuming that was due to some market participants expecting a 1% hike or greater at the last meeting.

Hedge funds gonna be in a bit of trouble...


but every Hedge fund that files bankruptcy, an angel gets its wings

No one uses LIBOR anymore. And anyone using it is cause they have a legacy financing instrument pre-2018. They will burn off here in the next couple of years.

SOFR is totally flawed from the aspect that until just a few months ago - debt funds and everyone and their mom was using "SOFR" without acknowledging the difference.

But they didn't realize the diff between SOFR term and 30-Day SOFR. Because historically over the last couple of years since SOFR rolled out, they were within a few bps of each other. But now they are blowing out and will continue to do so.

Anyone notice the drop in the curve over the last week? Seems like 50bps across the whole deal... does it persist?