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Is A Flat Yield Curve A Harbinger Of Bad News?

Published Thu, 06 Dec 2018 11:11:41 -0500 on Seeking Alpha

Bond King Jeff Grundlach. Source: Barron's
On the surface the U.S. economy appears to be strong. The unemployment remains well below 5% (considered full employment). Average hourly wage growth for the month of October was over 3%, implying workers could switch jobs or demand higher wages from employers for staying put. However, the yield curve could be painting a much different picture. The spread between the 3-year and 5-year Treasury yields inverted earlier this week for the first time in over a decade:
For yield-curve watchers, the spread between 3- and 5-year Treasury yields inverted Monday, dropping to negative 0.6 basis points - its first time since 2007. To be sure, the 3/5 spread isn't the most widely watched measure. That's more likely to be the 2/10.
“The outright inversion could be reflective of the market pricing in some cuts starting in 2020, which may be helping the 5-year tenor outperform slightly,” said TD Securities rates strategist Gennadiy Goldberg.
Some suggested the inversion didn't necessarily foreshadow anything. After all, it is a minor part of the yield curve. The most watched is the spread between the 2-year and 10-year Treasuries. The 2-year yield is 2.83% and the 10-year is at 2.99% - a 15 basis point spread. It's also very flat, and dangerously close to becoming inverted.
Bond King Jeffrey Gundlach, CEO of Doubleline Capital, suggested the bond market signaled a weak economy:
Jeffrey Gundlach, chief... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
THOR INDUSTRIES 45.18   18.7 2.42 1.56 3.44
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 262.56   0.0 0.00 5.67 2.18
PROSHARES ULTRAPRO SHORT S&P 500 27.77   0.0 0.00 0.00 2.13
SPDR S&P 500 ETF 292.36   0.0 0.00 5.42 1.87
PROSHARES ULTRASHORT S&P 500 30.82   0.0 0.00 0.00 1.86
POWERSHARES QQQ TRUST SERIES 1 182.07   0.0 0.00 1.49 0.79
LCI INDUSTRIES 131.65   0.0 0.00 0.00 0.00
VANGUARD TOTAL BOND MARKET ETF  

THOR INDUSTRIES - THO
THOR INDUSTRIES - THO  


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