20 yr vs. 30 yr Yield Curve

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
dockinGA
Executive Member
Executive Member
Posts: 245
Joined: Tue May 04, 2021 9:29 am

20 yr vs. 30 yr Yield Curve

Post by dockinGA » Thu Oct 28, 2021 12:27 pm

It sounds like the yield on 20 year treasuries are now higher than 30 year yields as of today. Of course we always hear of a yield curve inversion in the 2 yr vs. 10 yr range is a great predictor of an upcoming recession, and I can understand in some ways why that is a good indicator/predictor of an upcoming economic contraction. But, what are the implications of an inversion in the yield curve this far out, hypothetically assuming that the spread continues to grow beyond the current ~.01%? Does it indicate economic issues that will set in further in the future than the usual 2/10 inversion? Does it indicate that the issues will last longer? Does it indicate nothing at all?

Just a random question I've been wondering about for the past few months as the yield curve is flattening.
dockinGA
Executive Member
Executive Member
Posts: 245
Joined: Tue May 04, 2021 9:29 am

Re: 20 yr vs. 30 yr Yield Curve

Post by dockinGA » Fri Dec 03, 2021 7:43 am

dockinGA wrote:
Thu Oct 28, 2021 12:27 pm
It sounds like the yield on 20 year treasuries are now higher than 30 year yields as of today. Of course we always hear of a yield curve inversion in the 2 yr vs. 10 yr range is a great predictor of an upcoming recession, and I can understand in some ways why that is a good indicator/predictor of an upcoming economic contraction. But, what are the implications of an inversion in the yield curve this far out, hypothetically assuming that the spread continues to grow beyond the current ~.01%? Does it indicate economic issues that will set in further in the future than the usual 2/10 inversion? Does it indicate that the issues will last longer? Does it indicate nothing at all?

Just a random question I've been wondering about for the past few months as the yield curve is flattening.
This one got no comments from anyone else, but in the month or so since I posted the difference between 20 yr and 30 yr yields has continued to expand. Also, the spread between 10 yr yield and 30 yr yield has continued to narrow, with a general flattening of the curve on the long end. Still not sure what this means, but I do wonder if this is the 'smart money' dumping into LTT's prior to a rise in short term rates that causes a collapse in equity prices? We are truly in uncharted waters.
murphy_p_t
Executive Member
Executive Member
Posts: 1675
Joined: Fri Jul 02, 2010 3:44 pm

Re: 20 yr vs. 30 yr Yield Curve

Post by murphy_p_t » Fri Dec 03, 2021 8:19 am

It's an interesting observation. Seems counterintuitive with all the talk of inflation?
dockinGA
Executive Member
Executive Member
Posts: 245
Joined: Tue May 04, 2021 9:29 am

Re: 20 yr vs. 30 yr Yield Curve

Post by dockinGA » Fri Dec 03, 2021 8:30 am

It's definitely counterintuitive. But who knows what the future holds. It will be interesting to continue to watch how the yield curve moves over the next few months, especially if the Fed completes tapering early and then quickly increases short term rates. Personally, I think that would be the end of this bull market run, but we'll see. If the Fed does raise rates and it does in fact look like it will induce a market crash, I wonder what they will do? Cave like they have in the past and reduce rates back to zero, and accepting inflation that runs up close to 10%? Or will they have the backbone to hold firm with rates to tamp down inflation, and allow the markets to finally fall back to 'normal' valuations? Anyway, I'm not sure at this point there is a good outcome on the horizon for investors regardless of what the Fed does or doesn't do.
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: 20 yr vs. 30 yr Yield Curve

Post by whatchamacallit » Tue Mar 22, 2022 12:06 pm

Anyone have any good visuals of real time yield curve?

I found cnn money has pretty good one. It is missing 20 year though.

https://money.cnn.com/data/bonds/
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: 20 yr vs. 30 yr Yield Curve

Post by whatchamacallit » Tue Mar 29, 2022 5:16 pm

Looks like CNN took down their yield curve at link above? Odd.

Here is better one I found

https://www.investing.com/rates-bonds/u ... ment-bonds
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: 20 yr vs. 30 yr Yield Curve

Post by jhogue » Tue Mar 29, 2022 10:30 pm

I like Fidelity’s pop-out Fixed Income and Bond Yield chart, which gives real-time quotes (when the markets are open) for broker CDs, Treasurys, Agencies, Corporates, and Municipals, in maturities from 3 months to 30 years +.

Some observations:
1. Yield inversions are not particularly unusual or especially predictive of recessions. They commonly happen within and also between bond categories.
2. The overall effect of the Fed’s massive injection of liquidity during the pandemic has been to compress yields up and down all the curves. 20 and 30 year broker CDs have been unavailable (i.e.,effectively zero) for some time.
3. The chart quotes yields in US dollars. German bunds and Swiss Franc bonds have long posted negative nominal yields. With US inflation now running at over 7%, no one is making money on bonds based on solely on the coupon. However, that is not to say you can’t make money with them: In March 2020 at the beginning of the lockdowns, 30 year T-bonds shot through the roof (price up/yield down). I sold my T-bonds down to 25% and immediately re-balanced the proceeds into equities, which had cratered at the same time. Uncle Harry was right, the PP works. Just follow the plan.

https://fixedincome.fidelity.com/ftgw/fi/FILanding
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
dockinGA
Executive Member
Executive Member
Posts: 245
Joined: Tue May 04, 2021 9:29 am

Re: 20 yr vs. 30 yr Yield Curve

Post by dockinGA » Thu Mar 31, 2022 6:20 am

jhogue wrote:
Tue Mar 29, 2022 10:30 pm

3. The chart quotes yields in US dollars. German bunds and Swiss Franc bonds have long posted negative nominal yields. With US inflation now running at over 7%, no one is making money on bonds based on solely on the coupon. However, that is not to say you can’t make money with them: In March 2020 at the beginning of the lockdowns, 30 year T-bonds shot through the roof (price up/yield down). I sold my T-bonds down to 25% and immediately re-balanced the proceeds into equities, which had cratered at the same time. Uncle Harry was right, the PP works. Just follow the plan.
Very good comment. I was also able to shift bigly from LTT's into equities, and I even got lucky enough to do it on March 23 2020, the exact bottom of the market crash. Just so happened that was the next trading day after my normal financial bookkeeping activities on the 20th of each month.
Post Reply