It’s about to blow…

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by laflammaster

Generally, yields start to diverge after the convergence, indicating some fuckery aboot- and I am seeing today 3Y diverge more from 20Y than I’ve seen throughout the week.

Bond market, generally, is traded between large professional institutions. And it is a great signal for a market collapse, when the ‘smart money’ decide to pull out of the bond market.

Bonds and bond yields are inverse. The higher the bond value, the lower the yield is. The lower the bond value, the lower the yield. The convergence of yields indicates that professional institutions have been selling their bonds (in this case Treasuries) for some time now.

There are many combinations that can come about.

10s2 (fred.stlouisfed.org/series/T10Y2Y/)

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10s3

10s5

10s20

and so on.

The reason for 10s2 is that it is generally accepted as the most consistent predictor of a recession.

If you expand the 10s2 to max from the link, you will see that every US recession in the history of tracking this data since 1976 was preceed by this indicator going negative.

  • August 1978 –> March 1980 Recession (7 months)
  • September 1980 –> August 1981 Recession (12 months)
  • December 1988 –> July 1990 Recession (18 months)
  • February 2000 –> March 2001 Recession (13 months)
  • December 2005 –> December 2007 Recession (24 months)
  • August 2019 –> February 2020 (5 months)

 

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