The Yield Curve can serve as a leading indicator of predicting the future stock markets' direction.
The Yield Curve is a graph showing how the yields on government bonds change till the bonds' maturity. Government Bonds are debt obligations issued by a national government. The government (issuer) is obliged to repay the principal (amount borrowed) at the maturity date + interest (coupon) at fixed times to the bondholder. The difference between stocks and bonds is: The stockholder has an equity stake in a company (i.e. they are owners), while the bondholder has a creditor stake in the state (i.e. they are lenders).
The yield yurve is a functional display: The horizontal x-axis presents the time till maturity, while the vertical y-axis depicts the annualized percentage yield to maturity.
The basic idea is:
At times of economic growth, the yield curve is upwardly sloped (i.e. rising), because there are no hints that the government could not repay the investor as agreed.
At times of economic recession, the yield curve is inverted (i.e. falling), as fears of the governments inability of repaying the investor as agreed arise.
A. Set varoious bond rates in Tradingview:
1. Click at the Plus Symbol at the top left
2. Add US30Y
3. Add US20Y (in same pane)
4. do that till US03M
5. Change the color of the line graphs from US30Y light to US03M dark. Therefore you will get a nice color gradient whenever the yiel curve is healthy.
(The first pane shows the 30yr, 20yr, 10yr, 7yr, 5yr, 3yr, 2yr and 3M yield curves of the US FED)
B. Set long term, mid term and short term yield differences in Tradingview:
1. Add a new pane each with e.g. the symbol US30Y-US02Y.
If these curves fall, it recession might come. If one of these curves falls below zero, i.e. the interest rate is 0 and smart money can not make money with bonds. Whenever we have had a recession, many different yield curves were inverted.
The yield inversion is indicated when the short term yield periods rises sharply to the percentage of the long term yield, while the long term yield does not increase to keep its initial space to the lower yields.
Government Bonds and Stocks tend to be in an anticyclical relation. Whenever stocks rally, bonds are down and vice versa. Big Money avoids stocks if they can get risk free gains with bonds. Bear in mind that the bond market is way more liquid and therefore a great place for Institutions to make their billions.
The Smart Money outflow of the stock market can be seen the clearest at high growth stocks, as these were the best promising to make gains at low interest rate times.
The Yield Curve is a graph showing how the yields on government bonds change till the bonds' maturity. Government Bonds are debt obligations issued by a national government. The government (issuer) is obliged to repay the principal (amount borrowed) at the maturity date + interest (coupon) at fixed times to the bondholder. The difference between stocks and bonds is: The stockholder has an equity stake in a company (i.e. they are owners), while the bondholder has a creditor stake in the state (i.e. they are lenders).
The yield yurve is a functional display: The horizontal x-axis presents the time till maturity, while the vertical y-axis depicts the annualized percentage yield to maturity.
The basic idea is:
At times of economic growth, the yield curve is upwardly sloped (i.e. rising), because there are no hints that the government could not repay the investor as agreed.
At times of economic recession, the yield curve is inverted (i.e. falling), as fears of the governments inability of repaying the investor as agreed arise.
A. Set varoious bond rates in Tradingview:
1. Click at the Plus Symbol at the top left
2. Add US30Y
3. Add US20Y (in same pane)
4. do that till US03M
5. Change the color of the line graphs from US30Y light to US03M dark. Therefore you will get a nice color gradient whenever the yiel curve is healthy.
(The first pane shows the 30yr, 20yr, 10yr, 7yr, 5yr, 3yr, 2yr and 3M yield curves of the US FED)
B. Set long term, mid term and short term yield differences in Tradingview:
1. Add a new pane each with e.g. the symbol US30Y-US02Y.
If these curves fall, it recession might come. If one of these curves falls below zero, i.e. the interest rate is 0 and smart money can not make money with bonds. Whenever we have had a recession, many different yield curves were inverted.
The yield inversion is indicated when the short term yield periods rises sharply to the percentage of the long term yield, while the long term yield does not increase to keep its initial space to the lower yields.
Government Bonds and Stocks tend to be in an anticyclical relation. Whenever stocks rally, bonds are down and vice versa. Big Money avoids stocks if they can get risk free gains with bonds. Bear in mind that the bond market is way more liquid and therefore a great place for Institutions to make their billions.
The Smart Money outflow of the stock market can be seen the clearest at high growth stocks, as these were the best promising to make gains at low interest rate times.