3 and 2 year yield curve inversion

August 31, 2005 7:30pm by

One of our commenters today noted the 2 and 3 year yield curve inverted

Here’s what that looks like, intraday:
click for larger chart

2_2_3_curve

Source: Bloomberg

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I can’t say I know what this means . . . any idea?

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What's been said:

Discussions found on the web:
  1. Joe Loserman commented on Sep 1

    I looked at the fed’s historical yields and this happened in 1999 near the end between the 10 & 20. Nothing
    really changed. It also happened with the prior inversions – a minor inversion occurs.

    Bad stuff seems to hit when the 5 & 10 or 2 & 10 really ivnert and stay that way.

    So we’re getting closer every day.

    -Joe

  2. nate commented on Sep 1

    What do you think will happen to stocks when investment in housing slows down?

    The following URL has input on this. Your perspective would be interesting.

    http://tinyurl.com/97bhe

  3. Contrahour commented on Sep 6

    Jason Goepfert at http://www.sentimentrader.com had an interesting analysis of the 2-3 year inversion –

    “There were six 2yr/3yr inversions since that time, and five of them lead to an inversion in the 3month/10year, with an average lead time of 55 trading days. But it wasn’t necessarily a good sell signal for equities…between the time the 2yr/3yr inverted and the time the 3month/10year did so, the S&P 500 showed an average return of +2.0%, with the largest loss being -5.9% and the largest gain +15.5%. So while Wednesday’s yield inversion in the middle of the curve may portend an eventual inversion in the 3month/10year spread, it is not a reason in and of itself to sell stocks here. ”

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