Yield curve is currently a hot topic in the United States. At least, in the economic circles (tag). Why is it so hot?
Well, yield curve is a locus of points of interest rate for bonds of different maturities and right now, it’s inverted. Inverted yield curve means expected future short term interest rates are falling. At the same time, inverted yield curve usually precedes a recession.
Earlier in December 2005, the Federal Reserve raised the US interest rate. While at it, the all-powerful Alan Greenspan for the first time in many months, abandoned the word “accommodating” from his vocabulary. Many see that as a hint that the US market has reached its peak.
Greenspan however has dismissed the talk of upcoming recession. He and a few others don’t believe that an inverted yield curve is a signal of a downturn. I hope he’s right.
If he’s wrong, given that the US is Malaysia’s largest trading partner, Malaysian export might suffer quite a bit unless demands from elsewhere pick up. Malaysia certainly doesn’t need to catch an American flu.
How about that to start the new year? Pessimistic already?
