Market MakeHer Podcast 18. Understand The Yield Curve, Treasury Bonds, and Stock Market Impacts
Nov 9, 2023
Discover the intriguing world of Treasury bonds and the yield curve! Learn how these financial tools can predict economic trends and signals like inflation and recession. Explore the role of the U.S. Treasury and why its securities are deemed risk-free. Dive into buying strategies for Treasuries and understand market dynamics, including how supply shocks can shift investor sentiment. Unpack the implications of various yield curve shapes on GDP and stock performance. A fascinating look at fixed income and its impact on your investment portfolio!
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How The Treasury Funds Government Debt
- The U.S. Treasury issues T-bills, notes, and bonds with different maturities to finance government debt.
- These securities range from short-term bills to 30-year bonds and form the backbone of government borrowing.
Short Rates Come From The Fed, Long Rates From Markets
- Short-term rates track the Fed's federal funds rate while long-term rates reflect market supply and demand.
- Longer maturities should usually offer higher yields to compensate for locking up money and inflation risk.
What An Inverted Yield Curve Means
- A normal yield curve slopes upward because longer-term bonds usually pay higher yields than short-term ones.
- When short-term yields exceed long-term yields, the curve inverts and can signal expected economic slowdown.