Is the Yield Curve Really Flattening?

By: Gary Tanashian | Wed, Mar 26, 2014
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There is a lot of talk now about a flattening of the yield curve. This talk has been among the most intense right here at the website you are reading at this moment. A flattening curve is commonly viewed as bad for gold, and according to Mark Hulbert, is an indicator of a coming recession.

Why you should care about the yield curve

But is the curve really flattening or is this all hype based on Janet Yellen's press conference comments? Here is a chart the likes of which we have been using in NFTRH for many months now, the 30 year vs. the 5 year yield.

TYX:FVX Daily Chart

MarketWatch shows a similar chart in its article...

Treasury curve now flattest since 2009

Here we should lend some perspective. Okay Beuller, I ask you what is different this time from the last flattening?

TYX:FVX Weekly Chart

I am not going to pretend to sit here like some genius blogger and post all the conclusions so that we all know exactly what is going on (according to one guy's imperfect world view). But what we do know is...

But there is a running distortion on the fly and not you or I know how it will resolve. It is not normal and it (in my opinion) belies desperation on the part of those promoting it. To me, it looks like the latter stages of an 'all or nothing' operation that was put in play years ago. 'All or nothing' implies all in and totally committed. Otherwise, why has ZIRP not already (and long ago) begun to be incrementally phased out?

One conclusion that can be made is that this alignment continues to be favorable to whomever it is that borrows from the Fed Funds window exclusively. That is of course due to the beneficial (and again in my opinion, immoral) ZIRP. They can lend out at any other point on the curve for a favorable spread.

The curve is not flattening when ZIRP is used as the short term measurement point, as it is when the 5, 3 or 2 year yields are measured.

And people wonder why the rich get richer. They should stop looking at politics and start looking at finance (okay, the post rambled a little).

 


 

Gary Tanashian

Author: Gary Tanashian

Gary Tanashian
http://www.biiwii.com/

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