Bonds are not distorted. They are the ‘truth’ and hence the yield curve now really matters

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The High Convexity Conviction –  Is The Yield Curve Really Distorted?

 

This report re-examines the US Treasury yield curve. There are two take-aways. First, what drives the yield curve is unambiguously liquidity, and the latest flattening is entirely consistent with the peak and recent fall-back in US liquidity conditions. Second, the efficacy of the yield curve slope as a predictor of the business cycle is improved enormously when it combines, like now, with high convexity. In short, the fixed income markets are exactly on-track and already starting to discount an upcoming US recession.

 

We have also included an article that was later published in the Journal of Fixed Income (Spring 2018).

 

 

See our latest published research, Global View – The High Convexity Conviction –  Is The Yield Curve Really Distorted? - March 2022

 

 

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