Yield Curve vs. Real Fed Funds Rate

Yield Curve vs. Real Fed Funds Rate In modern history, every recession was preceded by an inverted yield curve and high real interest rates. When an inverted yield curve occurs, short-term interest rates exceed long-term rates. It suggests that the long-term economic outlook is poor and that the yields offered by long-term fixed income securities will…

The S&P 500 Hits All-Time High

The S&P 500 Hits All-Time High Bulls make money and are happy again… Yes, but until when? Keep in mind that the US stock market is currently overvalued by 9%. Image: Hedgeye Risk Management LLC

Why Do Eurozone Bond Investors Accept Zero Long-Term Interest Rates?

Why Do Eurozone Bond Investors Accept Zero Long-Term Interest Rates? Because they have a deflationary view of the euro area economy. Now, investors are losing so much money just by holding German bonds in real terms (adjusted for inflation). Today, the Germany 10-Year bond yield hits 0% again. Keep in mind that raising interest rates in…

Greek’s 5-Year Bond Yields Have Fallen Below US 5-year Government Bond Yield

Greek’s 5-Year Bond Yields Have Fallen Below US 5-Year Government Bond Yield Which one would you choose? Greek bonds or US counterparts? This is a great example of financial market madness. Mark Twain once said, “History doesn’t repeat itself, but it does rhyme.” That’s true! Greece has spent around half its time in default on its…

Real GDP vs. Real Fed Funds Rate

Real GDP vs. Real Fed Funds Rate One of our most favorite charts is the real GDP vs. the real Fed funds rate (adjusted for inflation). Historically, recessions begin when the real Fed Funds rate exceeds GDP growth. We are far from that today. So, this cycle should not end any time soon. Real Fed…

Real Fed Funds Rate

Real Fed Funds Rate Real Fed funds rate is a key indicative factor, because it’s a very good measure of how tight or loose monetary policy is. Real Fed funds rate is the “true cost” of borrowing money. Recessions have always been preceded by a substantial tightening of monetary policy, which, in real terms, matter…