There have been many recent recommendations to extend out along the yield curve given the municipal yield curve is approaching historic highs (401 bps 1-30yrs ).
If you consider that every possible transaction in the economy is arbitraged against the Treasury yield curve, it is clear that paying banks above the Treasury yield curve to hold reserves will depress both total demand and bank lending.
Most people believe that an inverted yield curve heralds a recession, and right now we have an inverted yield curve at the point where new money is supposed to enter the economy.
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But we have the steepest yield curve that we've had in the last 40 years, and yield curve steepness is an overly simple sense a predictor of future bank system eagerness to lend.
If SHY is rising and TLT is falling in value, the yield curve is steepening.
With the yield curve as steep as ever, this bank's gross profit on lending will expand.
The most important indicator is the Treasury yield curve, which is still very steeply sloped.
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What could be worse than the Fed's flattening the yield curve and stoking 1970s-style inflation?
This would keep the yield curve relatively flat or mildly inverted as the Fed resumes hiking.
So much for the idea of a flattening yield curve bringing investors to the risk table.
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The rationale is that once interest rates begin moving upwards, the yield curve will flatten.
To exploit a flattening yield curve in a touchy investment environment, go with FLAT.
Real interest rates are negative going out 10 years on the Treasury bond yield curve.
So when the yield curve is steeper, banks have a fatter future gross operating profit margin.
By 2014, yield curve dynamics at JPMorgan could add a buck a share to profits.
We are surely on the eve of a rising yield curve, maybe steeply angled.
Right now, we have a normal yield curve, with interest rates rising with length of maturity.
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Currently, the Treasury yield curve ranges from 0.11% for 3-month T-bills, to 2.85% for 30-year T-bonds.
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For now, the historical euro risk-averse sanctuary remains at the very short-end of the German yield curve.
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Federal Reserve Chairman Ben S. Bernanke is paying interest on reserves and has flattened the yield curve.
One could argue that a flat yield curve will force banks to make more and riskier loans.
In other words, a flat yield curve has the potential to chase investors from equities into bonds.
These bonds are priced on top of the 30 year triple-A curve at a yield of 4.40%.
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Normally, tightening FRB policy emphasis pushes up interest rates all along the yield curve, bearish for equities.
As the muni yield curve steepens investors will start interpreting that steepening as a reflection of increased risk.
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The Fed has flattened the yield curve, which narrows profit margins on the next loan a bank makes.
There is an easier way to play the yield curve levitation I see coming, namely the banking sector.
Assume Alan Greenspan is through tightening and the yield curve turns more positive.
The pledge of aggressive buying has caused Japanese Government Bonds (JGB) to rally violently and flatten their yield curve.
If SHY is falling and TLT is rising, the yield curve is flattening.
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