The Meb Faber Show - Better Investing
Alfonso "Alf" Peccatiello on Dr. Yield Curve, Neighbor Tracking Error & The Emerging Markets Decade | #512
Dec 13, 2023
Listen to Alfonso Peccatiello, Founder & CEO of The Macro Compass, as he dives into the bond market, discussing the Yield Curve and its relation to recessions. He also shares insights on investment opportunities in emerging markets, offers unique perspectives that go against his peers, and explores controversial beliefs about central banks printing money.
01:11:51
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Quick takeaways
- Yield curve inversions are not immediate signals of recession but serve as precursors with recessionary dynamics taking months to fully manifest.
- Steepening the yield curve can happen through boost steepening or bear steepening, both of which can precede recessions.
Deep dives
Understanding the Mechanics of the Yield Curve
The podcast episode explores the mechanics of the yield curve, specifically the relationship between two-year and ten-year interest rates. It explains that when the Federal Reserve tightens its monetary policy, two-year rates reflect this tightening, while ten-year rates reflect the impact on future growth and inflation. The episode highlights that an inverted yield curve does not immediately signal a recession, but rather serves as a precursor to recessionary dynamics. It mentions the importance of sequencing and time lags in this relationship, emphasizing that recessionary dynamics may take anywhere from 10 to 27 months to fully manifest.
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