Friday, November 18, 2005

Inverted yield curve ...

Well, yield curve has become a buzz word again.. thanks to a closing gap between the short-term and long-term interest rates (0.08 as opposed to an average 0.75 spread). Economists fear that if rates in the short term exceed the long term, we could have the infamous "inverted yield curve" on our hands, a sign of impending economic downturn (as thought by some people, others debate it as well). This will ofcourse have implications on the real-estate bubble, and the rest of the economy as well..

Lets hope we ride this one out!!

2 Comments:

Blogger whatever_it_takes said...

Hi, i am ajay the guy doing phd in ucsb whom u replied to in global derivatives, undergrad form iit kgp. nice reading ur blog will be putting in my 50 cents whenever i can.

What u said is correct but is is this not a aberration? I mean in ideal market you expect this spread to be bigger and from now on you would expect that with further increase in short term interest rate, the long term rate will jump (more??) higher? Anyway everyone is expecting Fed to increase the rates maybe twice more, that would probably have more effect on long term rates than previous increases........

These interest rate increases have also affected the indian stock market not only the real estate here :). I lost half of all gains i made in indian market this year bec the dollor went up and all FII rushed away from market :). Everyone is now looking if Europe and Japan will increase their rate or not. All countries seem to be to are thinking abt increasing interest rates.

Just taking from instinct because things like interest depend on so many factors :)

7:49 PM, November 18, 2005  
Blogger Quantjock said...

You are right..inverted yield curve is an aberration (doesnt happen quite as often), I mean why would people pay higher rates for shorter term?

9:11 AM, November 21, 2005  

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