Re-inversion 10yr-3mo, Weakening Dollar

As of June 5th, 10yr-3mo reinverts.

Figure 1: 10yr-3mo Treasury spread (blue), and 10yr-2yr Treasury spread (red), both in %. Treasury via FRED.

Figure 2: Treasury 10 year, % (black, left scale), and broad dollar index (light blue, right scale). Source: Treasury, Federal Reserve via FRED.

The dollar has continued to depreciate since 5/29 (last observation on the dollar), by the DXY, another 0.5% as of 6/5.

My interpretation: the GDP outlook is looking less bright, and probably less so than indicated by historical correlation, given the elevated credit risk now implicit in Treasurys (see here). Moreover, continued dollar decline is to be expected as Treasury rates decline.

3 thoughts on “Re-inversion 10yr-3mo, Weakening Dollar

  1. Macroduck

    Meanwhile, in Off Topic land, a bit of good news. About the felon-in-chief! About the Middle believe-it-or-not East!:

    https://www.middleeasteye.net/news/trump-fires-slew-pro-israel-officials-america-first-course-correction

    The felon is reportedly chucking out staff which supports Israel’s current government, while bringing in people who will pursue a deal with Iran.

    Something odd is happening, apart from the felon’s economic illiteracy and hatred for intellect, foreigners and brown people. He seems to have real policy ideas, mostly having to do with (other leaders) killing people just because you can. He’s cranky with Putin. He’s cranky with Netanyahu. He’s cranky with his first-term self for blowing up the Iran deal.

    The first two could simply be because his promise of ending wars, at the drop of a hat, just by being himself hasn’t worked out and that makes him cranky. Don’t have a glib (but probable) explanation for the Iran thing.

    Love to see ideas from non-faux-news-types.

    Reply
  2. baffling

    a one point drop in interest rates by the fed would only occur if the economy is in imminent and significant danger. why is trump advocating for such a large drop in fed rates? hey bruce hall, why is trump advocating for monetary policy that only applies in dire circumstances?

    also bruce, it looks as though trump keyed the side of that red Tesla as they towed it out of the White House yard. you were aghast a few weeks ago when we talked about how bad of a person Elon was at the time. are you still defending the first buddy with such vigor?

    Reply

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