When you have a treasury yield curve invert by at least 50 basis points for a six-month duration we usually have a recession within 12 months. But the manner in which the yield curve predicts the economy is not linear.
More Quotes from John Lonski:
It was a very important lesson for investors to learn. For those investors who have considerable exposure to equities, it's not a bad idea to have some holdings in U.S. Treasury bonds to serve as a type of buffer, a type of insurance policy in the event stocks do drop sharply in price.John Lonski
The biggest threat to the bond market looking ahead 6-9 months is what becomes of overseas economies. Let us not forget that the Federal Reserve cut interest rates three times in 1998 because of the unexpected severity of overseas economic slumps.
John Lonski
There's a good deal of worry as to whether or not an overly strong yen might jeopardize this early stage of Japan's economic recovery.
John Lonski
We also had an outright inversion in 1998 and there was no recession until 2001, although I would add there was a deterioration in corporate financial health that got underway in 1998 that didn't really end until 2002.
John Lonski
I don't think it's going to stop. It may be a fine opportunity to lock in a fixed rate that may prove to be relatively attractive historically.
John Lonski
The major reason why the 10-year Treasury yield and the 30-year mortgage yield fell to near 30-year lows was because of pronounced weakness in overseas economies. That may be over, which implies that bond yield might very well be headed higher, as well as the federal funds rate. . . The sooner we get back on a normal course, the better.
John Lonski
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