The curve is flatter?

Says Mish in his interpretation of Curve Watchers anonymous.  Somethings seem semantic, but the yields are up everywhere, except the one year term, held constant.  That is nominally steeper, anyway, and there should be a real push to let one year rates float a bit.

What does the rising yields mean?  That investors are expecting firms to grow inventory levels (reserves) to get through the next crisis.  OK, from one side of the trade that is bearish, less final distribution and more internal inventory build up.   OK, that is an unwinding, a failed attempt at expansion.  Good analysis Mish.

What is the underlying hydraulic shape of the banker's curve?    In the hydraulic mode, the curve is a distribution of rates, a frequency specra, and will be bell shaped.  My eyeball tell me that underneath the Treasury curve is a spectral peaked bell  around the ten year term. (what I see today, Dec 1)  .  In hydraulic mode (no entropy encoding), the long end of the bankers curve has to go toward zero in yields for otherwise too much yield intrudes into negative terms and the economy requantizes.  Remember, hydraulic mode only works if the economy is not doing too much reverse gear.

So, as bankers move the spectral peak to shorter terms, the curve can spread out more, but bankers symmetry means the spread extends to the short term.  Its a smooth balloon, in the hydraulic mode, if you strip away the entropy we see bankers trying to get the best fit of a Gaussian bell onto the bankers curve.  They want to cover as much as possible without risk of intrusion in negative terms.

But, bankers  need actually real goods moving around to get the calculation done.   When real inventory fails to appear in response to bank lending, then the hydraulic bell curve suddenly shifts  right, protruding quite a bit into negative terms.   Debt payments get missed because of inventory shortages, the sudden shift because that is how we do reverse,  moves the spectral peak to longer term.  The right side of Bell protrudes into negative term.  In hydraulic mdoe we can track phase differences in goods flow as the cure shifts right.  Transactions costs dominate because of phase mismatch in flows, and the economy performs Requant, contracting to lower precision and the hydraulic mode starts from another equilibrium, an equilibrium in which inventories are biased toward positive growth again.