The rate cycle happens when the two year minus the one year rates exceed 15 basis points. That is the point where it is profitable to get a bond trader out of bed. When we reach that point, treasury, meaning Yellen will be politically forced to borrow at the short rate, and she will not be able to stop until the curve inverts and we have a, hopefully, mild downturn. Hopefully meaning a rate cycle that does not result in a technical recession.
That difference is now about nine basis points. The two year will jump five basis points and the one year drops one bass. So the appropriate bond trader should be prepared to go on duty.
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