What is the Yield Curve, and Why is it Flattening? 

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!

after all, the stock market has predicted 9 of the last 5 recessions.

"Hey no need to panic!" *one year later* "EXPLAIN A YIELD CURVE AND WHY EVERYONE IS PANICING PLEASE"

well here we are, the curve was right

In 9 minutes this video has taught me more about the yield curve than my university finance module has in 3 months

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!

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.

Who came here after yesterday's 800 point drop in the Dow? So well explained! Thanks man!

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

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.

It is now the time to panic. It has just inverted. Dun dun dunnnn.

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.

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".

Just inverted

Richard is one smart cookie.....I mean Bagel. ;)

Who's here after seeing Michael Burry and his damn tweets

Very clearly explained, and professionally presented. Well done, you are an inspiration to the younger generation!

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.

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.

Your channel will have millions of subs in the near future

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?

Investors buy those longer term bonds because they are amazingly safe investments. They do not pay a lot per bond due to the flattening effect, to be sure, but... ...money spent on bonds counts as money no longer taxable as business income! So, while it is basically the business equivalent of an old time passbook savings account (a terrible investment!), it does serve very nicely as a tax shelter. So, I see benefits to it. But, of course, when an indicator is viewed by the general public as a sign of recession, professional investors know it is just about time to go on a buying spree. Be afraid when everyone else is excited, and be excited when everyone else is afraid.

Yield spread is getting tight now, only 1.1% difference. With FED keep rising rate (0.25%) every 3 months, it will totally flat in 12 months. With investor start getting nervous because tariff, global economic slowdown, high debt, it will get inverted before 12 months. Sign of recession already started on October but I expect official recession start early next year, when 25% tariff kicks in against China.

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.

This might be the perfect yield curve explainer video.

So with it inverting, obviously not a good sign. Can’t believe I bought into the stock market just as it’s heading into a crash. Lol....sigh.

You seems suspicious. Are you from Canada?

Today the yield curve looks like a wavy letter v

Really cleared up a lot of questions I had haha

2:12 “Bonds are a debt after all. And like most debts, they need to be paid back at some point” LOL. I see what you did there

May 2020: should have Sold everything in 2018 lol

I have an important question: if I bought a 30 year treasury bond 12 years ago, so there are 18 years left until the capital is reimbursed, then is it still considered a 30 year bond on the x-axis of the yield curve?

As of today the yield curve is inverted. Aug 2019. Better buy gold, bitcoin and silver

Talked about coming rescission early on. Also your suggestion was solid. Kudos.

2019, the curve is inverted !

All hail the Orange Man, the person that will single handedly drag America into its next recession after more then 10 years, I guess the Simpsons were right

Thanks a lot sir , that was very helpful , you made my day !

At the time writing this comment (10/2023), US02Y is 5.15% and US10Y is 4.8%. Lets see what is coming up in 2024 or 2025. Hopefully we will not have recession.

Thank you so much for these videos. I am pretty economically illiterate and I actually understand what you are saying. Please make more videos. :-)

treasury = a place or building where treasure is stored.

Lol I love how I was looking up yield stuff for cfa level 1 prep and your video is just randomly in my recommendations. Yet it perfectly explains things I've been struggling with. And you're a cfa charterholder so I know you got the basics down properly. Thanks a lot for this.

Good content, but that constant "music" and clicking in the background is so annoying. Is that really necessary to keep your audience entertained?

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.

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.

Great video.. but just FYI... economics is not ever changing. That’s why the yield curve works.

it's really simple: "Wall Street profits come from lending at interest"(usury). why this model succeeds in the first place makes for an interesting question tho..

for the sake of precision there is a minor correction to be made - "If the bond price goes to $850" the yield is not "6.3%" as stated - it is 7.05%.

Very good Video, thanks. Besides Yield Curve what other indicators would you check to be aware of a recession

You are giving out great information. sometimes information channels go way under rated. keep up the good work.

I didn't just like this video... I loved it! Nice and thank you very much..

Who is watching today after selling most of the stocks and buying 30y bonds? :D

No worries...they'll all just print more money...😁😁

You look too young to be this smart. Subbed.

enter coronavirus

One thing you did not talk about is how bonds that have a long rate of maturity are much easier to pay back at a later date. Consider a bond that matures 30 years in the future, counting inflation around 3%, you would have twice as much money in 30 years making it easier to pay back ($1,000 in year 1 would be same value as $2,000 at year 30). The bond also loses value from inflation every year and must be taken into account when calculating returns.

Had to plot the yield curve using FRED data for my Financial Economics class, this is an amazing explanation of what I learned!

couldn't have been summed up any better than this!

Interesting to watch this video at this point in the cycle =)

Just to say the flattening isn't necessarily an indication of economic horror. Investors could expect a deflationary boom.

my plan is to go homeless

Very well explained. Reading a lot of comments suggesting recession coming soon. Likely within 6 months. Hope for best but plan for the worst . Worst scenario will be if and when climatic changes cause havoc at same time as economic recession occurs .

Thanks

Wouldn't this be a generational thing as we start to see a lot of boomers retire given our prevailing demographics?

thank god someone who knows how to explain things simply and knows what they are talking about...hard combination to find on the internet

Well, expectations were correct indeed 😂

I come from the future and yes, the yield curve made it again.

The curve is super flat in 2023

Two tiny corrections. Well one tiny and one a little more extended. Bond purchasers are Lenders, not Investors. Bonds are debt. Second, the curve is widely and erroneously seen as a predictor wheras it is merely an indicator of market sentiment. You have to make your own predictions based on any number of indicators you have chosen to rely upon and which might/should include the yield curve. I'm going to repeat that. The yield curve is an indicator, not a predictor. However tell a story enough times and fiction becomes fact. Similarly since most people think it is a predictor and since large numbers of investors don't actually do homework and react to soundbites and easy graphics, everyone reacts to the yield curve as a predictor, mainstream media will comment on it, community college accounting teachers will talk about it. The result is everyone behaves in ways that work to fulfill the prophecy. Guess what? That kind of makes it a predictor. 😏

This was the most helpful video ever! Thanks

It predicted the COVID crash

Paging SVB risk management ...

Can i have a pdf lecture of this relevant vedio lecture?

Since one end of the yield curve is subject to manipulation, the question should be how fast does the other end react? If the 10 year t-bond reacts slowly, then manipulating the 2 year end would also manipulate the yield spread. In that case, it's rather pointless to point to any implications of the yield spread, right? Also, does that effect all assets equally? It might be interesting to compare the yield curves to housing. The higher the yield spread is, the more attractive long-term investments are, theoretically. New homes are often built by borrowing short term loans like bridge loans first, whereas existing homes are often financed by long term loans from the get-go. So demand for one over the other ought to show a similar story, right?

Aaaand we're in recession :-D

your voice is clear everything is clear but the background music make it harder to focus, and distract me from the main message. i dont know why, most youtubers adds music to their content. your message do not need makeup. i wish i could listen to more then 4 min. seems sincerly intresting

Thanks for the interesting content! 😍 I’ve got a question: 🤨 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). I don't know what they are. What should I do with them? 🤷‍♀️

As a mechanical engineer I only see the Yield stress curve of steel, but the economic stuff around is to much for me......

Appreciate the detailed breakdown! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). How should I go about transferring them to Binance?

Yield curve wins again.

i feel so stupid. i really dont understand bonds at all. i cant find any information that makes them make sense to me. how can a long term bond be risky if it has a fixed return? like if the interest rate goes up why not just buy some more. how can you sell a bond for profit? no matter what its gonna pay the same amount . i just dont get it

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!

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.

Great video. I have a question about the yield curve. We know that all recessions were preceded by an inverted yield curve but not all inverted yield curves produced a recession. Does time inverted have anything to do with it? Does it have to be inverted for a specific time or longer to accurately predict a recession? Thanks

YO DOG THIS SHIT IS FLAT AS FUCK RN

I got lost from the beginning. What is this future recession all about? I show we are in a masked economic depression if not the longest ever recession. Accounting for the huge deficits to permit these recession like numbers points to a depression to me. Real GDP per Capita Year Growth Rate (%) 2001 -3.6 2002 -3.4 2003 -0.4 2004 0.6 2005 -0.2 2006 -1.5 2007 -1.8 2008 -5.7 2009 -7.3 2010 -1.1 2011 -2.9 2012 -1.5 2013 -2.0 2014 -1.5 2015 -0.8 2016 -2.5 2017 -1.9 2018 0.0 2019 -2.8 This is from using a non-contrived inflation rate.

Annnnd, the recession is here

@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.

Anybody else watching this a year later during the COVID-19 pandemic while kicking yourself? Lol

The yield curve, the Shiller's PE up to 27 on S&P 500, PEG dangerously high... maybe recession is coming.

Buy low and sometimes sell high, borrow Money to ppl. Only take investments at 30%+ anual year or higher. Never pussy out. Only buy food and essentials items for your home. Have a diversity of aplications like 8 at most and you, my friend, will be a star.

The old adage that correlation is not causation somewhat applies here. I know economics is a murky subject, but let's wait. I still wonder how investor sentiment on Government borrowing is connecting to the economic growth of a country. Perhaps RU-vid finance gurus can help me with this puzzle.

Thanks for the video! Any opinion on Elon Musk's recent tweet regarding the next crisis appearing no later than spring/summer 2022?

Thanks. Presently the 1 year yield is greater than yields out to 7 years.So the curve is inverted. Which investors would buy longer term debt? Looking at Europe & Japan is it the case that the US is buying its own longer term debt (monetising) ?

No need to panic 2018 COVID 2019😆 Very useful video, thank you so much!

As of February 2020 the yield curve is inverted..... Let's see what the future brings Stay safe out there bros, the crash is coming

Dude U talk too fast, and please bring all your examples with numbers not only theory, cuz it’s a little hard to understand for people whose first language is not English. Sorry if I hurt U but please explain more clearly, slowly and more numbers thanks U

Just bumped in this video again after preceding the panic in wall street as the bond yields historically broken 1.00% directly after the fed cut the rates.. recession all over the horizon..

I don’t understand why people would choose 10 year with lower yields than 2 years. An economic recession wouldn’t stop your bond payments so why go for 10 years?