Wed 12 Jul 2006
Check out the latest CD rates at ING Direct… I copied a few of the rates here:
- 6 mo – 5%
- 12 mo – 5.25%
- 24 mo – 5.30%
- 26 mo – 5.25%
- 60 mo – 5.25%
So, if you’re shopping for CDs, ING will pay you more to hold your money for 24 months than to hold it for an even longer term. In economic parlance, that’s an inverted yield curve. (You can see a similar inverted curve at VirtualBank where the big winner is the 6 month CD at a 5.55% APY.)
Nevermind that the real bond market is also inverted right now. We can discuss the implications of that in a different post…
July 12th, 2006 at 9:24 am
Yeah, I’ve been thinking about writing about the inverted curve but I couldn’t think of what to say other than “crap”. The last time we had an inverted curve, growth was still strong, comsumption was higher, the rates were lower by .75 and the markets were up. Now? Quite the opposite: PCE dropping, markets under selling pressure. Plus this inversion was in place before the latest rate hike so now it’s even more pronounced. What I’m trying to say is that an inverted curve usually means recession on the way. Not always and it didn’t last time but last time we weren’t seeing growth threatened on so many fronts as now. Double, double toil and trouble. Fire burn and cauldron bubble?
July 12th, 2006 at 5:47 pm
Mauldin has a ton of info to say about the inverted yield curve. Go to his archive section on http://www.2000wave.com and check out all the many articles that reference the Yield Curve, his favorite topic. This article in particular is the most interesting to me since it shows the probability of a recession within 1 year based on various inversion levels. Great stuff and a must read (and re-read in times like this): http://www.2000wave.com/article.asp?id=mwo123005