Flattening Treasury Curve Signals Efficient Trading

by: Roger Nusbaum

Roger Nusbaum submits:
Have you taken a peek at the treasury market recently? The curve looks like it's having a parallel shift so that it will still be flat when the Fed raises rates next week.

This is some very efficient trading. I am still trying to figure what it means. Will the curve stay flat no matter what, which I think means the Fed keeps going because rates are not at a point that discourages real estate speculation? The dilemma there is that a flat curve usually implies an expectation of slowing growth. Higher rates as growth slows is not ideal.

Another idea I expressed several months ago was that the reissuing of the 30-year bond (just a couple of weeks away now) should put upward pressure on ten year yields. If that is what is playing out the fed should stop at 4.25% because the dynamics of the market would be solving the housing issue that the Fed has been concerned about.

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