Ladies and Gents, the yield curve
The Yield Curve inverted some more today. The 30 year rate is now lower than the 3 month rate. The yield curve has been inverted for some time now, but it hasn't been fully inverted until yesterday/today. What does this mean? It means that we are headed into a recession...maybe. At the very least a slow-down. People consider the yield curve to be a leading indicator for the state of the economy. In the last 6 out of 10 (or 7 out of 10) times that the curve inverted, we've had a recession in the economy. So go fig.
The normal yield curve is upward sloping, which make sense. If I tell you that I need to borrow money for 3 months, you'll give me a better rate (all else being equal) than if I told you that I needed to borrow money for 30 years. With more time, you have more risks, so you expect to be compensated for that risk.
We'll see how this yield curve plays out later.
Here's a graph of the current yield curve.
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