Collapse of the Yield Curve

I ran a chart like this a few weeks ago, but it's worth revisiting.

The collapse of the yield curve is simply stunning. Not that long ago, all of the lines were fairly stable. Now, they're plunging (at least, the blue and black) and there seems to be no end in sight.

Comments

[i8lunch:]

I think this presentation shows reason enough that further, immediate, aggressive rate cuts are needed; despite inflation.

2008 Mar 05 09:07 AM

[john haskell:]

inflation? What are you talking about? so wheat prices have gone up 100% in the last six months, but I don't eat raw wheat. I also don't use any West Texas Intermediate. These are all just ephemeral rises in volatile individual commodities which can be safely disregarded while we try to make sure Joe Speculator stays in his million dollar house.

2008 Mar 05 09:47 AM

[garlicbulb:]

This chart proves the feds are cutting rates which we already new. It would have been nice to see this spread over a wider timescale. Maybe 10 years or so.

2008 Mar 05 10:15 AM

[300mph:]

I don't understand your choice of terminology. The chart clearly shows to me the steepening of the yield curve not the collapse of the yield curve. Collapse implies flattening which we clearly do not now have.

2008 Mar 05 10:38 AM

[Ray Lopez:]

I agree with 300mph--this is a classic steepening of the yield curve--good for money lenders.

2008 Mar 05 10:53 AM

[AU:]

Go to "Stockcharts.com", then click "Dynamic Yield Curve" in the left hand column, then click "Animate" and you will have what your asking for. I would rather have a link to the animated chart than the one represented in this article...... but thanks for trying.

2008 Mar 05 10:56 AM

[Eddy Elfenbein:]

The Fed Funds rate is at 3%. Despite the cuts, the three-month and five-year rate are still will below the Fed.

2008 Mar 05 11:25 AM

[John R:]

"AU" has it right, check out the following link: "stockcharts.com/charts...".
If you drag your cursor across the chart it will move the "dynamic yeild curve" proportionately. It's cool.

As "garlicbulb" said, a ten year chart would be more informative. It would show the Fed's drop in interest rates after "911" to spur on the economy. It worked then and will work now ... but in my opinion it's the stimulus package (especially "accelerated depreciation") that will spur on quick job growth in America by rewarding capital expenditures on business equipment. Were in for a hot market, I believe.

2008 Mar 05 01:30 PM

[Go West:]

what do you mean collapse of the curve. Steeping, I understand. Going back to a more normal shape, Yes. Can the author explain what they are talking about? Thanks.

2008 Mar 07 05:29 PM