Tuesday, January 12, 2010

Yield Curve Hits New High

The yield curve has hit a new high as shown above. Short term rates are at an all time low and long term rates are rising well above previous levels.

The above shows these rates and their change in a bit more detail for the 90 day and 10 year yields. The figure below is most interesting.

This is the chart of the spread of the 90 day to 10 year yields and the plot of the ratio of the spread to the peak spread. We saw a peak yesterday and thus yesterday represents 100%. We ran at 80% for most of the past few months but now we are peaking and this means that the good old banks like Goldman can borrow for nothing, loan it back to the Government for a great spread, make their guaranteed 9 figure bonuses and take the taxpayers to the cleaners. This is all thanks to Treasury and the FED.