1. Jason Coyle, Mark DeCicco, Luke Ditton, Jagger Doll, Katrina Eggleston
Inversion Alert
Jason Coyle, Mark DeCicco, Luke Ditton, Jagger Doll, Katrina Eggleston
Section B; Group C

2. Bonds
Represent the debt between an investor and a corporation/government
Safe and reliable investment
Have better interest rates than banks do
Short Term Bond
1 Month Bill - 10 Year Note
Carry Lower Yield=Less Risk
Long Term Bond
15-30 Year bond
More Yield=Higher Risk due to inflation

3. “Yield curve is a way to measure a bond investors’ feelings about risk”- Fidelity

4. Yield Curve

5. What it means to invert
The yield for a shorter term bond is larger than a long term bond
Investors have little confidence in the near future economy because they see it as riskier
A quick inversion could be just a part of the market trend
Some inversions have not preceded recession

7. Why the U.S. and other countries have it
Map of the economy
Indicator of possible recessions, inflation, etc

8. List of regions with Yield Curves
Australia
Belgium
Bulgaria
Canada
Costa Rica
China
Finland
France
Germany
Great Britain
Greece
Hong Kong
Italy
India
Indonesia
Japan
Korea
Malaysia
Netherlands
New Zealand
Norway
Pakistan
Philippines
Romania
Russia
Singapore
Slovakia
South Africa
Spain
Sweden
Switzerland
Thailand
United States
Vietnam

9. What other signs usually follow it?
Federal Funds Rate cut
Operating Costs Rise
Execs “shelve investments”
Higher % Dedicated to Paying off Debt
Increase in Temporary Employment
Less confidence
Unemployment Rises
Other Countries’ Economies Slow
Federal Funds Rate cut
Credit Crunch
Consumer Borrowing Costs rise
Operating Costs Rise
Execs “shelve investments”
Adjustable-Rate Mortgage Rates increase
Higher % Dedicated to Paying off Debt
Less Expendable Income
Spending Slows
Hourly Workers Hours cut
Increase in Temporary Employment
Less confidence in future
Jobless Claims for Unemployment Benefits
Unemployment Rises
Other Countries’ Economies Slow
Housing Prices Fall

12. What the Past Tells Us
A “2-10” inversion has preceded every recession since 1950
Downturn may not happen as late as 34 months after, 22 months on average
Markets rally 15% after inversion on average
Last happened in June 2007
Fed cut rates starting Sept. ‘07
In 11 of 13 cases, Fed lagged in cutting rates
After an inversion, lenders tend to tighten credit standards
Is less lending the cause?
Date of inversion
Start of recession
Number of months
09/17/1978
01/02/1980
15.5
09/12/1980
07/01/1981 10
08/11/1989
07/01/1990 11
02/02/2000
03/01/2001 13
02/01/2006
12/01/2007 22

15. Links