Steep Yield Curve

[Ash4781]

http://www.yieldcurve.com/marketyieldcurve.asp

I've not looked at a yield curve in a while. Looks pretty steep. Not sure if this means a rapid recovery as what Stephen Hester says

"arguably what we need as an economy is a rather gradual emergence from recession where the economy can complete the rebalancing that has not in any way been completed, where people can save more, borrow less, the balance of payments deficit closes, the government gets its own deficit under control".

But he says that if we return to our ways of the boom years, where households and businesses spend but do not save, the UK could face a "Japanese style lost decade where the economy is highly unstable, or worst case we actually have another down period, a so-called W-recession."

http://www.bbc.co.uk/blogs/thereporters/ro..._dangerous.html

So if QE works then what ?

THe mind boggles if the BOE has to do a rapid unwind. What if you are on one of those 2-3% tracker mortgages ? (edit corrected 5%)

Is this the forced selling some time unspecified in the future that is mentioned in the media?

Edited September 12, 2009 by Ash4781

[mbga9pgf]

http://www.yieldcurve.com/marketyieldcurve.asp

I've not looked at a yield curve in a while. Looks pretty steep. Not sure if this means a rapid recovery as what Stephen Hester says

http://www.bbc.co.uk/blogs/thereporters/ro..._dangerous.html

So if QE works then what ?

THe mind boggles if the BOE has to do a rapid unwind. What if you are on one of those 2-3% tracker mortgages ? (edit corrected 5%)

Is this the forced selling some time unspecified in the future that is mentioned in the media?

Its hardly steep. If it were jumping to 10% in the next 5 years I would agree. But 4.5% yeild is hardly footloose and fancy free?

[Frank Hovis]

http://www.yieldcurve.com/marketyieldcurve.asp

I've not looked at a yield curve in a while. Looks pretty steep. Not sure if this means a rapid recovery as what Stephen Hester says

Looks incredibly steep in the short term if you mentally turn the x-axis into a fixed scale. Which raises the question why short rates are so low if these are teh future expectations.

The big surprise to me is the parity of UK and US rates, we always used to have to pay 1 - 2% over US.

These are from the BofE site and have uniform time scales:

UK instantaneous nominal forward curve

UK instantaneous implied inflation forward curve

http://www.bankofengland.co.uk/statistics/yieldcurve/

[porca misèria]

I've not looked at a yield curve in a while. Looks pretty steep. Not sure if this means a rapid recovery as what Stephen Hester says

Forget everything you know about yield curves.

They're printing money. Yields are being directly manipulated, and have lost their relationship to the economy.