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Yield Curve Disinversion

Published Mon, 21 Oct 2019 07:21:37 -0400 on Seeking Alpha

My main writing duties have been cleaning up my manuscript. One of the sections I was looking at discussed how the manuscript text was mainly written by early 2019, and I am not attempting to have it capturing the latest data. One scenario that was obviously embarrassing would be a recession starting before the official publication date.
If we are to believe the conventional interpretation of the yield curve, the odds of that outcome has receded. The figure above shows the 2-/10-year slope, which was only mildly inverted. (The 3-month/10-year slope is probably better as a recession indicator, but the 2-/10-year is the trading vehicle. Duration matching a 3-month bill versus a 10-year note is not exactly a sensible structure.)
We are back to where we have been for a few years: a dead flat curve. This is not necessarily a statement about recession risks, rather the direction of Fed policy. The lack of acceleration in the economy has to be telling Fed officials that their estimate of "neutral" rates has to be close to current levels. As such, the risks for the next move in interest rates is symmetric. Given the massive demand for duration matching and the age of the current cycle, there is no obvious reason why there should be a large positive term premium in the Treasury curve at this point.
My argument is that we need a large change in the propensity to invest in order to generate some cyclical excitement (in either direction). I confess ignorance as to what might cause... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CORNERSTONE TOTAL RETURN FUND 11.38   0.0 0.00 2.48 22.00
ZWEIG FUND 10.98   0.0 0.00 1.44 13.14
LIBERTY ALL STAR EQUITY FUND 6.38   0.0 0.00 0.65 10.30
PROSHARES ULTRAPRO SHORT S&P 500 25.26   0.0 0.00 0.00 2.32
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 272.32   0.0 0.00 5.67 2.10
PROSHARES ULTRASHORT S&P 500 28.97   0.0 0.00 0.00 1.97
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
POWERSHARES QQQ TRUST SERIES 1 193.23   0.0 0.00 1.49 0.78

CORNERSTONE TOTAL RETURN FUND - CRF
CORNERSTONE TOTAL RETURN FUND - CRF  


Older articles featuring Cornerstone Total Return Fund (CRF):
Stocks Yielding More Than Bonds Again
A Steeper Yield Curve Should Benefit Financial Stocks
Dividend Yields Around The World
Dividends By The Numbers In October 2019
Bond Market History: When The Yield Curve Un-Inverts
Why Does A Yield Curve Inversion Suggest A Recession?
This May Not Be Your Father's Inverted Yield Curve
Pay Attention To The Message The Yield Curve Is Sending
Negative-Yielding Debt: Monetary Contagion Spreads
The Dollar, High-Yield Bond Market And S&P 500 Revenue Growth

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