Hodge Podge. Overall purpose of a Yield Curve serves as an economic indicator. The basics. An upslope curve when short rates are below long 10, 20, 30 yield interest rates informs future economic growth. This shape looks like a perfect trend line.
Inverted Yield curve when short interest rates are above long rates informs economic down turn or possibly recession is here. Bumped Yield Curve when middle rates 5 to 7 year are above short and long rates. Economic caution warranted.
Flat Yield Curve. When short and Long Yield rates are the same. This is trouble and means dead economic times. Why follow the yield curve and why Flat is vital to current economic conditions is because when short rates rise generally long rates fall.
The current 30y to 1 year spread runs 1.79, 10 to 2 runs 0.95 and 10y minus 3 month = 1.31. The spreads warns against raises due to possibility to cause a Flat Yield Curve and dead economic times. A flat yield curve to unwind generally means short interest rates must fall to allow long rates to rise. The perfect trend line is again seen.
But Yield curve shapes take time to develop, more time to maintain and hard to unwind when flattened. The Fed’s 3 rate rise dream places short rates directly close to the 1.79 spread. Long rates must rise before the Fed can raise and not jeoparrdize economic growth. The 10 year yield against an 11 point monthly range fails to make the case to raise Fed Funds. Yields are ranging, not trending therefore only a few points may be gained in any given month and not enough to continue the current upslope yield curve.
For years, the Fed speculated to add another interest rate to the current mix. Think markets are dead now. Add another rate and American markets will trade like the Norweigan stock market at 6 points per day.
Why importance to markets in yield curves is because Commodity prices are found on the yield curve as commodities since the start of time travel up and down the yield curve. Years ago, Commodities traded up and down the interest rate curve but as yields were introduced, Commodities found a new home.
How about write about Interest rates, market structures or forecast GDP or a fundamental announcement then zero views. Mouth dropping scary to commentary on current traders. This allows anybody to write thin air information and its accepted as true and no checks. My writings and forecasts are the result of hard work and effort to always be correct and perfect. Others refuse to inspect and analyze the masses of data as I do.
EUR/USD. Most vital point today, 1.0985 and 1.1049 vs 1.1173 and 1.1238.
Further lesson. USD.
USD/CAD vital points. 1.3423 and 1.3457 vs 1.3492, 1.3526 and 1.3545.
USD/JPY vital points. 110.43 and 110.72 Vs 111.28, 111.44 and 111.57.
USD/CHF. Vital points. 0.9767 and 0.9792 Vs 0.9818, 0.9842 and 0.9856.
Stated in order of movements. USD/CAD is best performer in movements. Its built into CAD’s price and rarely changes.
2nd is USD/JPY then comes slowest mover in USD/CHF. USD/JPY trades between USD/CHF and USD/CAD. Its the factor of each’ pair prices. If USD/CAD was a 0 point currency pair then USD/JPY would become the big mover.
Brian Twomey
BRIAN TWOMEY ON TRADING 