Earlier this week, we brought to your attention "A World of (mostly) Flattening Yield Curves."
In the Sunday NYTimes today, Dan Gross does a nice job on the same subject:
"But there are signs that the United States no longer has a monopoly on the conundrum. In recent months, the yield curves in Japan and Germany, the second- and third-largest economies in the world, have been flattening, while the yield curve in Britain has already inverted. "Long-term interest rates are even lower in Europe and Japan than they are in the U.S.," said Kenneth Rogoff, a professor of economics at Harvard.
Yet these economies lack some of the structural features of the United States economy. And each is at a different phase in the business cycle. While America may very likely have a slowdown in growth in the second half of this year, Mr. Rogoff says, Europe and Japan are likely to gain economic strength as the year progresses.
What gives?
"The conundrum is global," said Lakshman Achuthan, managing director at the Economic Cycle Research Institute, based in New York. The same factors that are influencing the interest rate climate in the United States are having similar effects on overseas bond markets."
Of course, no discussion of Yield Curve flattenings or inversions would be complete without a graphic:
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click for larger graphic
courtesy of NYT
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I will point out that these curves are not as flat as the ones Panzner created, using the 2 and the 10 year Treasuries. (Dan, what duration are the treasuries used for the NYT charts?)
UPDATE: January 9, 2005 5:58am
I somehow missed the legend at bottom — The NYT chart show the full yield curve for the entire maturity (3 months outward), versus our prior chart showing the spreads between two and 10 year maturities over time.
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Source:
The World Isn’t Flat, but Its Yield Curve May Be
Economic View
DANIEL GROSS
NYT, January 8, 2006
http://www.nytimes.com/2006/01/08/business/yourmoney/08view.html
“The World Isn’t Flat, but Its Yield Curve May Be”
I love that headline!
Actually, I first talked about this in August, partly to showcase our new book about Japan, called “Japan’s Business Renaissance.”
You can read my blog entry about it here: http://www.nslg.net/2005/08/bond-spreads-show-japan-rising.html
And you can read more about the book here:
http://www.renewalcycle.com
Great bloggin’ Barry! :)
Adam