What is the Yield Curve, and Why is it Flattening?
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- Опубліковано 2 сер 2018
- You may have read news articles or heard somewhere that "the yield curve is flattening," but what does that mean? Find out with today's video!
Intro/Outro Music: www.bensound.com/royalty-free...
Episode Music: freemusicarchive.org/music/Pod...
DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.
What are your thoughts about the flattening yield curve? Do you believe investors should shift their holdings or stay the course with their current investments? Let me know down below!
Under normal conditions I would say that even if we had a recession on the horizon, I might retrench somewhat, only getting rid of my riskier assets, but with the Fed keeping short term interest rates at historic lows for so long, coupled with quantitative easing - which is nothing more than the printing of vast amounts of money - the distortions in prices out there could be huge. Prices on some assets like stocks and real estate may need to drop as much as 50% to get back to historic norms. The next recession could be a deep one. I, for one, am staying in cash until rates return to some semblance of normalcy and the Fed reduces its balance sheet by selling some of the assets it purchased to facilitate quantitative easing.
Interesting take, thanks for sharing!
First off, I want to say a big thank you. Even as an Econ student, bonds were really not given a lot of discussion in my program of study. Your video was well presented and it helped me to grasp the concept much better. To answer your question about the flattening yield curve, I do believe it can be a tool for predicting recessions. We are currently at a very low unemployment level, and the Fed continues to raise interest rates. Once the Fed realizes that it has raised rates too much, it will start to backpedal and begin lowering them. From my point of view, this will be a major predictor of recession.
Glad that the video helped! And thanks for the input!
Even Planet Money is divided over it. Some say it is OP, other overrated. But it had not been wrong about indicating a recession.
In 9 minutes this video has taught me more about the yield curve than my university finance module has in 3 months
Who came here after yesterday's 800 point drop in the Dow? So well explained! Thanks man!
Glad you found it useful!
Did they teach this in school? Was I asleep, or was it only for economics majors?
@@GaryCruz LMAO I am a civil engineering major. Def seems like a think only econ majors would learn.
@@GaryCruz They do not unfortunately. I have a bachelors in Finance, but I only learned about this through my work in the investment field
Its weird how some of the more nasty things are swept under the rug. Like the Federal Reserve. I learned nothing about it in school.
I have a degree in economics and trade the yield spread as well as other investments. Im pleasantly surprised how well you explained this. Great Job!
Thank you!
Cortez has a economics degree also lol...
farmermatt629 bachelor
@@farmermatt629 Just because one idiot has an economics degree, it's not relevant?
Vaibhav not what I was saying.... I basically meant their are a lot of educated idiots in the world
after all, the stock market has predicted 9 of the last 5 recessions.
Funny, I see what you did there.
I didnt see, tell me :(
and let's not forget someone makes money on it too. stock market predictions are one big bull****
@@MrEaglenator 9 predicted - 5 actually happened
Skys the limit. Recession never gonna hit.
well here we are, the curve was right
so the curve predicted a virus from a chinese lab 2 years before?
@@nicolasmulet2364 indeed
Sounds like some kinda conspiracy theory to me 🤨🤫🤐
@@vanzypubg8469 actually it was just a conspiracy
If you pay attention to markets you would’ve heard many analysts calling for a “Black swan”. I personally don’t think COVID was serious enough to shut down the economy; and some evidence supports that, but a virus made for a great catalyst for banks to repurchase assets for pennies. Never let a crisis go to waste.
"Hey no need to panic!"
*one year later*
"EXPLAIN A YIELD CURVE AND WHY EVERYONE IS PANICING PLEASE"
Because it's heading to reverse. That's why the algorithm is getting active about it. A recession is indeed coming. Everything is getting affected, from gaming to real estate all around the world. This recession looks scary af if you ask me.
"Listen to the experts" -Mainstream media
"Nobody panic" - The experts
:everyone runs for the exit, buys gold:
This video is EXCELLENT. I've been listening to macro videos, so many mentions of yield curve and I was sort of getting it. I also read 2-3 articles and watched 2-3 other videos. This one really brought all the complexity together in an incredibly simple and easy to understand manner.
Kudos to you! and thank you!
The Yield Curve just inverted yesterday, Friday 22 March 2019.
@Ezra Goldberg $8740 as of today 30th May 2019...
LeRoy Parham, Jr. and again
Yeah.. recession is coming
just iron it
and now recession begins
I'm glad you used the 2-10 yield curve. I have been seeing more people talk about 3-5 or 1m-30yr because the numbers are more dramatic. We have to be consistent about our vocabulary if this is going to mean anything.
very under rated channel.
Thank for info. There is news about yield curve inversion all over the news today but no one seems to explain it as well as you did
This is, by far, the best short video on this topic I've ever seen. thank you.
Best explained video on yield curve by far. Many before you tried and failed and many might in the future, but here you've outdone yourself with the simplicity mate. Bravo!
thank god someone who knows how to explain things simply and knows what they are talking about...hard combination to find on the internet
Had to plot the yield curve using FRED data for my Financial Economics class, this is an amazing explanation of what I learned!
Bro I had economics, investment management and financial management modules in uni but you explained the yield curve way better! Simplified but way better, thank you.
Investors generally aren't concerned about "locking in" their investment when they buy long-term debt, because they can always sell that debt at any time.
Long-term yields decreasing relative to short-term yields may indicate a price reduction of short-term debt instead of a price increase in longer term debt, because short-term maturity redemption may have more risk than "riding out" a recession by holding longer term debt instruments.
The first priority of investors is return *OF* their investment before return *on* their investment.
I just discovered this channel and I'm learning so much even when I have been dealing with stock markets for the last few years. Hats off to you sir.
Very well explained! I look at the 10-2 bond spread occasionally to see if it is becoming inverted, which is essentially the same as watching the yield curve flatten.
Hamish Hodder - Stock Market Investing thank you! Yea a lot of analysts I know look at the spread as opposed to the actual curve; a lot easier to keep track of what’s going on
The Plain Bagel Congrats on 2k!
Very clearly explained, and professionally presented. Well done, you are an inspiration to the younger generation!
This is the first time - ever that the yield curve has been concisely explained to me ....thank you so much
This is the best vid explaning the Y curve. Thank you so much!!
Richard is one smart cookie.....I mean Bagel. ;)
Haha thanks Jay!
This might be the perfect yield curve explainer video.
The best video about the Yield Curve. Period.
Thank you for posting a clear presentation of this subject.
The economic problem in the U.S. is that during Obama's presidency, interest rates were so low that anyone with money to invest, invested it in the stock market, so the stock market was overvalued. Now that the recession has ended, the Federal Reserve is raising interest rates again, which lures people to buy bonds again, which reduces the amount of money that's pouring into the stock market, which reduces the prices of stocks, and hence further reduces the incentive to invest in the stock market. The U.S. is undergoing a long, slow (overdue) correction of the stock market. But I don't see any significant problem(s) in the rest of the U.S. economy.
You raise a great point; markets are seeing heightened volatility despite improving economic data. That being said, some are concerned that Trump's tax cut may have obscured economic data (given that it provided a largely temporary boost to earnings growth), so I believe part of the current pessimism revolves around the possibility of growth not meeting expectations once the tax cut is lapped.
Thanks for the comment!
So well explained! This is like the third video I’ve watched on the yield curve and I finally get it!
You are giving out great information. sometimes information channels go way under rated. keep up the good work.
The one explanation I finally understand. Subscribed!
couldn't have been summed up any better than this!
Thank you!
Thank you, for simplifying the concept!
Very informative and illustrative. Thanks for the explanation.
Just inverted
Funny, I've heard the media talk about it 1000 times but not once did they explain what it was or even mention that it was the bond market. Why don't they call it what it is "The BOND yield curve".
Your channel will have millions of subs in the near future
Thank you for doing this new video! I'm going to watch it a couple of times to make sure I understand everything.
Glad you found it useful! It’s certainly a little fast-paced but hopefully it can fill in any gaps about the concept.
Officially my favorite page
Thank you so much for these videos. I am pretty economically illiterate and I actually understand what you are saying. Please make more videos. :-)
Wow, excellent video. Clear and concise explanation, good production value, and you have a very pleasant style of presentation. I'm gonna spend some time perusing your channel.
Great video! Currently studying for my CFA L1 - the next topic is Fixed Income. I will apply this video to what I learn.
Talked about coming rescission early on. Also your suggestion was solid. Kudos.
Thanks for sharing the valuable information.
This was the most helpful video ever! Thanks
Lovely explanation. Thank you!
As a mortgage banker this is a great watch. The same investors bidding into mortgages are also looking at the long term of the treasury bonds. Those yields help me sense what might happen to interest rates on mortgages.
@7:42 Richard: "what has happened in the past probably won't recur perfectly in the future..." -- The past is absolutely repeating itself in 2022. Thanks for this timeless video.
Thanks a lot sir , that was very helpful , you made my day !
Finally found a channel that explains well.
FANTANSTIC video so informative and crystal clear thank you !!! please cover Interest rate swaps and why not options :) !! Thank you again
Great explanation and great video graphics! Keep up the good work. :)
Great presentation! It really helped me understand the yield curve. So because of a better understanding, and I don't usually do this, but I moved my 401k completely out of stock mutual funds into US Treasury mutual funds in November and avoided loosing around 17% of value. Unfortunately, there's not many options with the company 401k. But I expect to buy back into the same stock mutual funds in the coming weeks at a huge discount.
Amazing job explaining this!
This was excellent. Thank you!
Wow that was the best explanation I've ever seen of it
Really cleared up a lot of questions I had haha
Glad you found it useful!
I didn't just like this video... I loved it! Nice and thank you very much..
The gesturing Canuck... well done.
Haha I like the alias
In this video you explained that the curve was flattening, but it was still healthy at the time of this video, the curve has inverted twice since then and I would love to see a new video about what you think about this and what you think is causing it. and maybe you could tell us where you think this is all going or what you think is coming. Great video.
Perfect explanation
I am a product controller and this video helped me
Very well explained!! Coming from someone who graduated in finance!
Thanks for this awesome video!
It would be interesting to see you go back to these older videos and see how covid effected this. How did the curve get affected by the stimulus and shutdowns?
I love your channel and learn a lot from your videos.
But doesn't the yield curve capture yield to maturity instead of current yield? Although I understand that the shape of curve will look similar in both scenarios but the slope can vary.
Are different types of yields used to plot the yield curve in different markets?
Just curious to know.
The bond yield has been CRUSHED recently. Even Ray Dalio has said that bonds are not a great investment right now. If you want to diversify in this economy, you will be better protected with Gold & Silver.
Hi! Would you pretty please share what software you use for those animations? Looking to transition from stock footage to something similar to your animations.
You explained this concept so well. like button and subscribed
You're way better at explaining this than my professor. Our last exam the average was a 65, but he took out one question bumping the average up to a 70... Sad.
Thank you very well explained. Been watching some finaical UA-cam channels and since August I've noticed most of them saying the yield curve is essentially flat now and they are worried about another recession this year especially after how volatile Decber was. We shall see, I'm almost 23 and been with post college job for 7 months now. I know they say don't time the market but my gut tells me to wait it out a couple more months before I use my TD Ameritrade account. Nothing wrong with building a bigger emergency fund I guess.
Great video, very informative!
Excellent! Great job!
Great insights for the video, which tool and how you make the graphs and content for it?
Great vid! What book would you suggest to read about investing?
Wow, that music at the beginning is the same as the music they play when I'm on hold with my broker. I've listened to it for endless hours it seems.
Could you do a video on the inverting of the yield curve that’s happening now and explain it please? Your videos make it so easy to understand Finance! Thank you!
Keep up the great work! 🙌🙌
Nice video, Richard. Well done!
Thanks Ben!
Awesome video. Congratulations!
Your videos are great. Keep them coming!
Kaleb Pilkey thank you!
It is now the time to panic. It has just inverted. Dun dun dunnnn.
Stick to the plan!
The Plain Bagel what if the plan was to panic when the yield curve inverts?
D:
what are we shorting?
diversify
Really well explained. Thanks
Excellent video! Thank you very much!
Dear Richard, very good & informative "lecture". Since this video was done Aug 2018, 2.5 years ago, could you please update whether the situation has changed since then? Thanks.
finally someone that explains it good
I love this video, is there any other channel in addition which can teach macros so beautifully
Richard, thanks for the info., can you tell me where to look for info on bond duration. I saw a economist the other day say that if you had purchased the 30 year treasury bond in 2018, in 2019 you would have made 30% on your investment. I sure would like to know how to calculate that.
That was a very good explanation!
very nice explanation! just subscribed!
term structure of interest rates & yield curve both are same .
Very well explained .
One question comes to my mind ,what will happen if China and Japan starts selling or dumping all or half of the US securities at a lower rates ?
Dude... This Video is so good...
Would it be possible to include English subtitles to your (extremely helpful!) video? I am now using the automatically generated subtitles by Google but this is not entirely accurate. Many thanks in advance, grts from a Dutchie!
Some old guy from Omaha named Buffett says to be greedy when everyone else is fearful and be fearful when everyone else is greedy. I'm no expert, but it sounds about right to me.
Thank you Sir! :)
Wow just amazing. That was awsome dude
Glad you enjoyed it!
Nicely explained..though I am from India, like all analysts from emerging market economies I closely follow US markets and yield curve flattening and subsequent inversion has come into picture around sept 2018 times...
so helpful, thank u!
Thanks , well explained
Very good Video, thanks. Besides Yield Curve what other indicators would you check to be aware of a recession
This is an excellent video, very useful information