Monday, April 1, 2019

Inverted Yield Curve: Prosperity in Sight

It happens that a Treasury bill that matures in three months is yielding 2.46 percent — 0.03 percentage points more than the yield on a Treasury that matures in 10 years. This is called inverted and it is said to predict Depression.  
I do not see the logic of it. If somebody is willing to pay MORE for a short term loan, that means that he needs money NOW and thinks that with time, he will prosper and easily pay back the loan. If somebody asks higher interest for a short term loan, it means that the coming months are uncertain, but he is sure that prosperity will arrive later. In my opinion, there must be a temporary shortage of liquidity and the people needs cash to bridge over these uncertain times. 
In fact, the vision of Israel Katz as Finance Minister and Betzalel Smotrich as Defense Minister is fueling the investors' animal spirits. 

No comments:

Post a Comment