Print
Word
PDF|
This section contains 440 words (approx. 2 pages at 300 words per page) |
|
The Inverted Yield Curve Is Bullish for Growth, March 13, 2006
Summary: Many analysts have forecast that the inverted yield curve presages a slowdown or a recession, based purely on history, without making a serious effort to understand why the curve inverted with little rise in long-term rates, a unique event. Others invoked a positive spin by attributing the inversion to immeasurable and untestable propositions, such as increased investor confidence in the Fed's commitment to keeping inflation in check. This week, New York Fed Bank President Tim Geitner suggested that capital inflows have artificially depressed long-term interest rates in the U.S., an explanation broadly consistent with Fed Chairman Bernanke's discussion of a global savings glut. If correct, this explanation implies more rate hikes than currently expected by investors.
Many analysts have forecast that the inverted yield curve presages a slowdown or a recession, based purely on history, without making a serious effort to understand why the curve inverted with little rise in long-term rates, a unique event. Others invoked a positive spin by attributing the inversion to immeasurable and untestable propositions, such as increased investor confidence in the Fed's commitment to keeping inflation in check. This week, New York Fed Bank President Tim Geitner suggested that capital inflows have artificially depressed long-term interest rates in the U.S., an explanation broadly consistent with Fed Chairman Bernanke's discussion of a global savings glut. If correct, this explanation implies more rate hikes than currently expected by investors.
It is well known and accepted that capital inflows, mostly by foreign central banks to recycle their current account surpluses, have absorbed a very sizeable fraction of the outstanding Treasury debt...
|
This section contains 440 words (approx. 2 pages at 300 words per page) |
|
