State of the Yield Curve as of 9/24/22
Here is a quick tweet thread I put together regarding the state of the yield curve in various developed countries throughout the world.
1) Here is a quick rundown of the state of #yieldcurve in some of the world's most advanced economies. We begin with #Canada where the entire curve has inverted the 30Y. The 1M is even 14 bips above the 30Y. @PayItForwardDad @JoeConsorti @JoeCarlasare @AnselLindner pic.twitter.com/5qLn58fFs7
— Kent Polkinghorne (@moist_turtel) September 24, 2022
2) In #Germany, a country where inversions are apparently a very rare occurrence, the 2s, 5s, 7s, 10s, and 15s are all trading below the 30s. @PayItForwardDad @JoeConsorti @JoeCarlasare @AnselLindner pic.twitter.com/RjYwSDezDO
— Kent Polkinghorne (@moist_turtel) September 24, 2022
In the #UnitedKingdom the 10Y has inverted the 2s and 3s while the 30Y has inverted the 5s, 7s, and 20s. @PayItForwardDad @JoeConsorti @JoeCarlasare @AnselLindner pic.twitter.com/8ZrEJ64T6D
— Kent Polkinghorne (@moist_turtel) September 24, 2022
Lastly, is the #UnitedStates where the 30Y has inverted the 52w, 2s, 3s, 5s, 7s, 10s, and 20s. The 2s are currently 59 bips above the 30s. This is one of the most deeply inverted yield curves in decades. @PayItForwardDad @JoeConsorti @JoeCarlasare @AnselLindner pic.twitter.com/gqk6PvKWhy
— Kent Polkinghorne (@moist_turtel) September 24, 2022
No matter where you look, especially in the developed world, the yield curves are telling you a couple things. First, the #inflation narrative is not long for this world. Second, bank credit will be at some of the tightest levels since at least the #GFC. #USD #eurodolllar
— Kent Polkinghorne (@moist_turtel) September 24, 2022
The yield curve inversions aren't solely confined to the developed world either. In Brazil, the entire curve, with the exception of the 5s, is trading at a higher yield than the 10s (the 10s are the longest duration bond offered by the Brazilian government). Also of note is the state of the forex market where the US dollar is at 20 and 35 year highs against the euro and the pound. Additionally, both India and Japan, two of the largest countries in terms of GDP, are both burining through their forex reserves to try and prop up their embattled currencies.
Everything going on is pointing toward the exact opposite of inflation (an increase in the supply of currency) and toward deflation. The high costs associated with supply chain disruptions (which only occurred because of the Covid hysterics among us) are only making the dollar funding problems more acute.
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