Don't Worry About the Yield Curve

Does the yield curve really point to a slowdown? The nominal, current-dollar spread between the 10-year bond yield and short-term interest rates (the so called "yield-curve spread") has been closing steadily since 2014, and now stands at a 10-year low. However, in our view, the very low real levels of interest rates do not point to recession or slower growth ahead. The real, inflation-adjusted level of bond yields stands at historically low levels versus five-year inflation, and the real level of short-term rates sits under zero versus one-year inflation. In fact, we think higher short-term rates could boost growth by increasing the earnings of fixed-income investors. In real terms, the yield-curve... spread has been rising, not falling! Adjusting bond and short-term yields for long-and short-term inflation on the PCE (consumer) deflator, the real yield-curve spread has been rising since early 2015. The falling real-yield spread did anticipate the growth slowdown of 2015-16. But now, at 2%, the rising real-spread points to stronger growth ahead. more

Argus President John Eade discusses ESG investing and top Argus ESG picks

Market indecision continues

Stocks are mostly lower at mid-morning Friday as another up-and-down week comes to a close. Oil prices are lower, which has helped some transportation names this morning. ...  more