Why on earth could the 2 year be higher? With CDs if you lock your CD up for longer obviously you get a better rate...I am not an econ savvy guy in terms of fixed income.
Riddle me this TR2TR vs TR10Y
- Thread starter TimtheEnchanter
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I think the idea is that with the 2Y being higher than the ten...The 2Y you get 4% after 2Y. With the 10 you get 3.4 or whatever it is over a ten-year period. Why would you lock up your monies for 10 years that yields less than a 2Y lockup? After two years, that money is then free to go flailing around to seek a better opportunity?
I don't do fixed-income, so that is my edumacated guess, heh.
Then why don't you just shut up if by your own admission you have zero clue about fixed income? You seem to be unable to let a topic go by without having to add something. No matter how stupid.
Why don't YOU STFU? You added nothing to this thread, but I at least added a potential answer to the riddle?
At least I am TRYING! JESUS! M.W., what bug crawled up your ass here? All you did was attack ME, and not attack the problem the OP posted.
Fuck you then. I will no longer attempt to give a cogent answer to a question. For FUCK'S SAKE!
The inversion of 2-year/10-year curve is usually understood as the precursor to a recession. As you can see in the graph below, it has happened just prior to every previous recession in the past.
He does the same thing on the options threads - admits he knows nothing about options, and yet feels an uncontrollable need to write something.
And then, he does the annoying thing of posting a pointless music video.
I sense a deep unfulfilled need, on his part, of being accepted, or a craving for attention.
OP - apologies for the diversion.
Bills and notes are more sensitive to changes in interest rates and economic release data than further dated maturities. You can hedge short term rate risk by buying rate exposure further out, so you can hedge 2s with 10s.
Interest rate exposure is hedged by shorting rate futures or selling short dated and going to cash. If the rate on the short dated debt is high, it becomes expensive to be in cash, since you are forgoing a substantial rate of interest payment. Borrowing the debt becomes expensive, so treasury liquidity will suffer in this environment (not entirely sure about this one).
When rate futures tank, that means cash outperformed debt. This is serious shit if you're managing billions.
Hawkish Fed actions will affect the entire global fixed-income space (sovereign, corporate, developing, and emerging markets). The Feds moves also effect rates in default-swaps, FX swaps, the vol market, and even credit cards and car loans, CDs, etc.
I'm not a professional in this space.
Interest rate exposure is hedged by shorting rate futures or selling short dated and going to cash. If the rate on the short dated debt is high, it becomes expensive to be in cash, since you are forgoing a substantial rate of interest payment. Borrowing the debt becomes expensive, so treasury liquidity will suffer in this environment (not entirely sure about this one).
When rate futures tank, that means cash outperformed debt. This is serious shit if you're managing billions.
Hawkish Fed actions will affect the entire global fixed-income space (sovereign, corporate, developing, and emerging markets). The Feds moves also effect rates in default-swaps, FX swaps, the vol market, and even credit cards and car loans, CDs, etc.
I'm not a professional in this space.
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