What Is The Yield Curve & Why It’s Important?
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- Опубліковано 10 тра 2024
- You’ll often see the yield curve discussed in financial news stories. So in this video, I explain what it is and how it relates to bonds. I also examine the link between the yield curve and interests rates and what other factors drive its shape. Finally, I look at what an inverted yield curve can signal, how the yield curve varies through a business cycle, both steepening and flattening, and how you can use this knowledge to your advantage when investing both through good times and through crises.
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Timestamps
00:00 Introduction
00:51 Bond Yield & Price
03:55 The Long End Of The Curve
05:46 The Short End Of The Curve
06:54 Business Cycles
09:07 How Bond ETF Funds React
11:55 Yield Curve Inversion
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
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Thanks for your training. Can you please feature your courses in UDEMY? Thanks
It's a good history lesson. I am not sure the yield curve is so easy to interpret now we have such low rates at the short end and the QE effects with buy backs along the curve. You only have to look at recent prints and expectations of inflation to see the yield curve is not responding the way it would have in the past?
thank you so much for such a wonderful class.
Glad you liked it!
Great explanation!
Very well explained, thanks!
Glad it was helpful @BCM BCM
Great class!
Glad you think so!
Thank you a lot for the explanation! Although, I am not quite sure I understood it comletely. Could you please tell me why at the moment 7:45 you said ”when recession hit, the curve went from flat to upward sloping” becuase I did not see the yield curve being upward sloping or I might not be looking correctly at the graph. Thank you again for the great videos! I have just discovered your channel and I think it is very useful
Ramin, I was waiting for summary slide on how this can be played during crisis and non crisis time.
Regarding the US Treasury Yield so is it always the Fed control both values (for 1 year and 30 year) and increase/decrease the value of both at the same time?
Thanks for the video
I like this vid. Good insight.
Thanks
Excellent video
Thank you very much! @lwembawokiraggadenis7930
Thank you
You're welcome @Manoj Vonteddu
Can we really claim that the bond market is showing us anything about future growth expectations while we have QE distortion of bond prices?
Hey a big fan your content sir, also a programmer myself been wondering how do you make your visualizations? which tools they look very clean. Thank you
Hi @arsian shahid, I use ggplot2 package in R for my plots and RStudio to edit and run R code and I talk about how I produce some of my graphs in this video ua-cam.com/video/DGE1mGYYsHE/v-deo.html
Mike Green often pulls up a 5 year labour participation rate growth and it maps the yield even more accurately than the 5y median GDP Growth.
Thanks
Thanks @Edward Engulu!
wonderful
Thank you! Cheers!
Want to know about Shifts and Twist in the yield curve
Eg parallel shift , twist and Hump
Are you gona do a vid on the impact of the new covid strain? (To be watched at 2x speed of course hehe)
outstanding video....
Thank you so much 😀
So it is good time now to buy TLT ?
Great
Thanks
It's mentioned that the Short end of the curve is determined /controlled by the Fed, but in the future, could the Fed control the long end of the yield curve in order to flatten the curve? If they provide a new revenue stream to commercial banks (IOR) to get them to be the new buyers of 10 year bonds, might the Fed be able to allow Inflation to run high, without the risks of the long end yields going out of control. Isn't the 10 year bond yield driven by 'bond purchase demand'? If the Fed starts tapering, maybe they get the commercial banks to start buying the bonds they stop buying but on the long end to enable keeping a narrow curve. Thoughts?
Great explanation. People are too uneducated in economics. We need people and teachers like you.
Happy to help
That's the most understandable explanation with the best illustrative graphics I've seen on this subject.
Glad you think so!
👍
Can someone tell me why the long term yield tracks nominal GDP growth expectation rather than real GDP growth expectation?
Because yields are nominal also.
Thank you!
You're welcome!
So it's not a good return compared th equities
The yield curve does whatever the Fed wants it to do these days.
not true
Great educational video ramin
Thank you I am glad you found it helpful
which is the egg and which is the chicken? yields are defined by growth or growth is defined by willing to lend to government?
It's very possible to borrow funds for unproductive purposes. Growth is first.
I still cannot see how bonds currently can provide a hedge against equity with current yields being so low. I can see how flight from shares may lead to a temporary demand driven increase in bond market prices, but that will not necessarily happen with ultra low interest rates. If interest rates were currently higher yes I would agree, bonds are a hedge as the yield could be dropped so that the market price increases. A substantial risk in the stock markets at present is the prospect of increased interest rates causing a sell off, well if the interest rates increase the bond prices will fall and so will the market. No hedge there.
I agree with you. If I thought the market was taking a dive, I would flee to cash. I know it pays nothing but that is about what bonds pay at the moment.
@@RogerYeahmon the price of bonds went down, but the yields went up.
Thank you for the video!
Could you please expand a bit on how you derived/calculated the GDP expectations using 30 year bonds and vice versa?
Also if trying to look at the past (what rates were vs. what gdp was) I assume you can use the Taylor rule.
Thanks
To me, long-term bonds currently are a great ('yet' volatile) addition to the portfolio as an equity diversifier - the volatility (of a high quality asset) itself already has its own value - and more so, of course with it's ability to work as a hedge.
Great tool overall, helpful part of my portfolio.
Thank you so much for teaching me/us. 👍
That's hedging with an asset class that enforces a real loss (nominal seems overrecorded and inflation seems underrecorded).
Why is that net beneficial?
@@thesolitaryadventurer I won't get into much detail here, but let's just say i am willing to pay an insurance premium and losses don't always hurt as much as they seem to on paper.
With US inflation at 7% why do investors buy US Treasury bonds yielding a 2% nominal return?
They are lending money for a guaranteed real return of -5%, that’s a real loss of 5%.
Money supply can contract in the future. That changes the nominal to real conversion. Plus look at the buyers, lots of central bank activity, US acts as a reserve worldwide. Central banks are buying treasuries to add legitimacy to their own currencies, which sometimes have lower nominal returns on their sources. So they sometimes even have a positive spread because their nominal cost of cap is a further negative. Look at Switzerland. And then you have just the very real math of -5% is better than -7%.
Love your videos.
Great explanation.
I think you should concentrate on cryptocurrency aswell a bit.
Is a new market so there's extreme opportunity wich the regular stock market cannot offer In mater of percentage .
Thank you.
Thanks for watching
Thank you
You're welcome
Thank you
You're welcome