| Author |
Message |
     hailoh
Member
Username: hailoh
Post Number: 131
Registered: 04-2003Rating: N/A
Votes: 0
|
| | Thursday, June 02, 2005 - 12:02 am: |  
|
Each week Colin comments on the spread between short and long term bond yields, noting that a fall below 1% is a long term bear indicator.
Visit the dynamic yield curve at Stockcharts.com and see how a yield inversion does coincide with a major downturn.
Alan Kohler in the SMH today noted that bond yields in Australia are inverted: that is the long bond yields are lower than cash rates- an unusual occurrence in his words. Yet, his article was extremely bullish.
Can I pose the question to Colin: does his comment on yield inversion apply in all markets? Is he (or any contributor for that matter)able to post charts of this behaviour historically for the ASX?
I am impressed by the Dow Jones evidence - hard not to be. And if the press is pushing optimism where optimism shouldn't be, isn't that a call to contrarian arms?
[Apologies Hailoh, I missed this question. I think this has been answered by my discussion of yield curves and the Wright Model. Regards, Colin 2007-05-28]
(Message edited by colin_twiggs on May 28, 2007)
|
hailoh
Member
Username: hailoh
Post Number: 166
Registered: 04-2003Rating: N/A
Votes: 0
|
| | Wednesday, March 01, 2006 - 04:29 pm: |
|
I was wrong in referring to the Dow Jones index in the previous old post. The correlation of a recessionary sharp reversal and the development of inversion between short and long term bond yields in the US was strongest with the S&P 500. Inversion started about August 2000 and lasted until January 2001. It took about 6 weeks for the S&P to peak in mid September 2000, and thereafter it was all down hill.
Although the Dow and the XAO and most Australian sectors dipped a little in September 2000 the follow through was nowhere near as dramatic, except for one index- the XDJ ( Consumer Discretionary).
The similarity between the two charts is quite striking. If yield inversion in the US does materialise,and history repeats itself, it may take 4 to 6 weeks for economic events to unroll and destabilise the market. There could be interesting grazing amongst high fliers in the Australian Consumer Discretionary sector for traders looking to go short.
|
fibonacci
Member
Username: fibonacci
Post Number: 119
Registered: 10-2003Rating: N/A
Votes: 0
|
| | Wednesday, March 01, 2006 - 09:04 pm: |
|
Very interesting hailoh,
Is 1 out of 1 enough to "prove this relationship?
Have you studied previous similar occurrences? If so did they reveal the same?
John
You've got to
know when to hold 'em
know when to fold 'em.
|
hailoh
Member
Username: hailoh
Post Number: 167
Registered: 04-2003Rating: N/A
Votes: 0
|
| | Thursday, March 02, 2006 - 05:54 am: |
|
Good question, John. The conventional wisdom about the relationship was given a solid airing a few weeks ago when the ratio partially inverted for a day or so. I haven't found a charting/economics source that goes back further yet, though I have no doubt relevent material exists in subscriber websites offering archival material. I'll keep looking.
|
hailoh
Member
Username: hailoh
Post Number: 168
Registered: 04-2003Rating: N/A
Votes: 0
|
| | Friday, March 03, 2006 - 08:38 am: |
|
Hi Fibonacci.
A reference from Bloomberg reported inversions at these times:
1/1/80 to 25/4/80
12/9/80 to 23/10/80
22/1/62 to 16/7/82
6/1/89 to 23/6/89
11/8/89 to 6/10/89
24/2/00 to 22/12/00
The US National Bureau of Economic Research recorded recession dates for the same period as:
January 1980 to July 1980
July 81 to November 82
July 1990 to March 1991
March 2001 to November 2001
I have plotted these on the attached chart, where the inversions are the little tents and the official recession the horizontal lines. Movements in the market tend of course to anticipate events.
The correlations aren't ironclad but with each recession there has been a period of inversion preceding or associated with it. It may be that the actual inversion is simply a sideshow to the main story about rising interest rates, contraction of consumer spending strength, mortgage repayment squeeze, contraction in demand etc.
It all takes time for the indicator to unfold, but there seems to be fire associated with the smoke.
|
fibonacci
Member
Username: fibonacci
Post Number: 121
Registered: 10-2003Rating: N/A
Votes: 0
|
| | Friday, March 03, 2006 - 10:03 am: |
|
Hailoh, that's great info.
Your conclusion appears valid also.
Every week Colin notes possible dire consequences for the share market in regard to inversion of rates so more facts are helpful.
I have a narrow self-interest in that all my Superannuation money is in Australian heavyweight shares and at the moment the only possible change I've got in the frame is a switch to more international shares.
BUT the correlation between inversion and share market performance looks tenuous at best as the last one is the only one of significance [in long term] and "THE BUBBLE" could well have been a more significant cause of such a violent bear market.
John
You've got to
know when to hold 'em
know when to fold 'em.
|
moleman
Member
Username: moleman
Post Number: 257
Registered: 10-2003Rating: N/A
Votes: 0
|
| | Sunday, May 27, 2007 - 02:32 pm: |
|
G'day
I notice Bill McLaren is saying the 24-year bull run in 30-year T-bonds is at an end. He says this will lead to interest rates going up.
http://www.mclarenreport.net.au/articles/articles/134/1/May-25-2007-mclarenrepor tnetau/Page1.html
If he's right that has to be very significant and have huge implications. Is this a sign that with the weak USD, others aren't so prepared to finance the US debt? I've only got a layman's understanding of bonds so would appreciate comments .
cheers
MM
|
kate
Member
Username: kate
Post Number: 675
Registered: 04-2005Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 09:01 am: |
|
MM
I've just been catching up on the news and it appears that bond yields are now rising in Australia as well as the US.
Yet another warning sign that a correction is imminent.
Kate
|
colin_twiggs
Member
Username: colin_twiggs
Post Number: 2893
Registered: 09-2002Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 10:58 am: |
|
Confirmation from 10-year yields would help. They have not yet broken the downward trendline.
Regards, Colin
Though the fact that the current (2002 - 2006) reaction is slow, compared to the normal sharp reactions in a bear market (as in 1994 & 1999), suggest that the market has changed. Difficult to call a reversal on this alone, however.
(Message edited by colin_twiggs on May 28, 2007)
|
kate
Member
Username: kate
Post Number: 677
Registered: 04-2005Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 12:01 pm: |
|
Colin,
Thanks for posting the chart. I should have put in the link with my previous post which I'll do now. If the data is correct I think it indicates the trendline has been broken.
What do you make of it?
http://www.theaustralian.news.com.au/story/0,20867,21803397-643,00.html
Regards
Kate
|
colin_twiggs
Member
Username: colin_twiggs
Post Number: 2894
Registered: 09-2002Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 12:32 pm: |
|
Kate,
The article refers to the gap between Australian and US 10-year bonds.
I can see where Bill is coming from on the 30-Year bonds, but would like confirmation from the 10-Year TNX.
Regards, Colin
|
kate
Member
Username: kate
Post Number: 678
Registered: 04-2005Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 01:22 pm: |
|
Colin,
The way I interpret the article may not be correct but to me it seemed as though Paragraph 1 is unrelated to Paragraph 3 and 5.
I'd love to get my hands on the information he used for the article.
Posted a link to the TNX. Would a move above $49 be confirmation?
Regards
Kate
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=TNX&time=8&freq=1&comp =&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtsty le=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.a sp
|
colin_twiggs
Member
Username: colin_twiggs
Post Number: 2895
Registered: 09-2002Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 01:44 pm: |
|
Kate,
That is 12 months compared to 15 years on my earlier charts.
Regards, Colin
|
kate
Member
Username: kate
Post Number: 679
Registered: 04-2005Rating: N/A
Votes: 0
|
| | Monday, May 28, 2007 - 02:14 pm: |
| |
