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yield curve (back from the dead) un-inverted

RussianMike

Joined
5/9/06
Messages
296
Points
26
I was visiting my old colleagues last week and decided to check the bloomberg to see how the bond markets looked. Much to my surprise, the yield curve had "un-inverted" i.e. the 10yr yield is now higher than the 3 month. I've been trying to think about this and my thinking is as follows: Investors finally realized that a flat yield curve cannot continue forever and the market (yield curve) repriced. Does anyone have any thoughts/research on this? I was thinking that in an inverted yield curve you can borrow at a cheaper yield and buy shorter/better yield and live off the spread(the opposite of what banks normally do). I'm not too sure if these mechanics exist but I'd be interested to find out. I know that an inverted yield curve hurts banks b/c they pay deposits/CD's at higher rate then the rate loan out at(mortgages/etc).
 
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