GM all. A few months ago i posted some fixed income analysis:
Here's an updated version.
1. German term structure of interest rates since '97:
Attachment
2. Another angle of the term structure:
Attachment
3. Term spread vs the DAX:
Attachment
Now if you go through old papers pre-GFC (think fama, bliss etc), the current situation is obvious. Generally the long end of the curve is indicative of future inflation expectations. This makes sense, or at least, it did make sense back then. Today is a different story with the ECB jumping in causing massive price distortions. One thing is for sure... that a lot of textbooks after this era has past will need to be re-written.
But I'll stick with what I know. Term spread is tanking very quickly. Term spread does not need to have hit the bottom for a bear market to have begun, and it doesn't have to be negative either (inverted yield curve).
For me, term spread is THE metric to use when looking at the longer term relationship between default free securities and equities. Won't help us day trade probably, but it's good to know nonetheless.
Here's an updated version.
1. German term structure of interest rates since '97:
Attachment
2. Another angle of the term structure:
Attachment
3. Term spread vs the DAX:
Attachment
Now if you go through old papers pre-GFC (think fama, bliss etc), the current situation is obvious. Generally the long end of the curve is indicative of future inflation expectations. This makes sense, or at least, it did make sense back then. Today is a different story with the ECB jumping in causing massive price distortions. One thing is for sure... that a lot of textbooks after this era has past will need to be re-written.
But I'll stick with what I know. Term spread is tanking very quickly. Term spread does not need to have hit the bottom for a bear market to have begun, and it doesn't have to be negative either (inverted yield curve).
For me, term spread is THE metric to use when looking at the longer term relationship between default free securities and equities. Won't help us day trade probably, but it's good to know nonetheless.
Corripe Cervisiam!