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| A red figurine sits atop a trader's desk at the Frankfurt Stock Exchange last year. As short-term interest rates rise and long-term ones stay low, many economists are starting to worry about inverted yield curves and their knack for predicting recessions. (Krisztian Bocsi/Bloomberg) |
It may not have escalated to the level of water cooler talk, but an obscure and obtuse-sounding economic indicator is a hot topic of conversation among the investment community of late.
The yield curve on government debt — the gap between how much long-term bonds pay out versus short-term ones — is at its lowest level in more than a decade, and opinion is somewhat divided on how bad a sign it is for the economy.
Under normal circumstances, the yield on long-term bonds should be much higher than the yield on short-term ones to properly reward investors for the risk of waiting longer to get paid, particularly since inflation can eat away at value over time.
Read the full story here:
http://jamesalexandermichie.com/james-alexander-michie-cbc-news-yield-curves-threaten-invert-market-watchers-sit-pay-attention/
James Alexander Michie Blogger, a personal blog created by Michie, recently published articles related to Finance, Sports, Hockey, NHL, Travel, Photography, Random Musings.
The yield curve on government debt — the gap between how much long-term bonds pay out versus short-term ones — is at its lowest level in more than a decade, and opinion is somewhat divided on how bad a sign it is for the economy.
Under normal circumstances, the yield on long-term bonds should be much higher than the yield on short-term ones to properly reward investors for the risk of waiting longer to get paid, particularly since inflation can eat away at value over time.
Read the full story here:
http://jamesalexandermichie.com/james-alexander-michie-cbc-news-yield-curves-threaten-invert-market-watchers-sit-pay-attention/
James Alexander Michie Blogger, a personal blog created by Michie, recently published articles related to Finance, Sports, Hockey, NHL, Travel, Photography, Random Musings.
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