The Twist and Turns of the Yield Curve
Lately, we’re and fielding many questions about the yield curve. Today, let’s talk about what the yield curve is and what it may signal for the economy.
What is the Yield Curve?
As the image below illustrates, the yield curve tracks the interest rate and years to maturity of bonds.
As you can see, there are three types of yield curves.
- When the yield curve is flat, short-term and long-term bonds have the same yields.
- In a normal yield curve, as the maturity increases, the yield increases. Short-term bonds have lower yields than long-term bonds because the shorter maturity ties up investors’ cash for less time and gives them greater confidence that they will get their money back.
- When the curve inverts, short term bonds have a higher yield than long-term bonds. This can happen when, for example, the Federal Reserve raises interest rates or investors expect inflation to continue or rise.
The Inverted Yield Curve
Studies indicate that an inverted curve can forecast a recession, but analysts have not definitively established the exact causes for the connection. Yes, curves tend to relate to investors’ expectations about 1) the Fed’s monetary policy and 2) future economic performance. But is the curve a predictor or a self-fulfilling prophecy? You can dive deep into the analysis here.
Analysts at the Federal Reserve and elsewhere are debating whether the inverted yield curve currently signals an economic recession (i.e., “hard landing”) or whether slowing inflation, strong employment and a growing GDP indicate a “soft landing.” We’re watching that debate and the data behind it carefully.
If you have any questions about bonds, curves, landings and/or your portfolio, please don’t hesitate to contact us.
Going Green, Beautifully
There’s a lot more to “green architecture” than tinted windows, high-efficiency HVAC systems and the use of safer building materials. Aesthetically, architects worldwide are designing buildings that look as beautiful as they are energy efficient.
For an amazing use of plants, both inside and out and cave-like atrium, check out the award-winning headquarters of Sanko Holding under construction in Istanbul, Turkey. The Museum of Tomorrow in Rio de Janeiro, Brazil uses water from Guanabara Bay to regulate indoor temperature and adjustable solar panels that orient to the sun’s rays. And for an elegant integration of form and function, don’t miss the Supertrees at Gardens by the Bay in Singapore.
How We Help
Probate: The Problems & A Solution
In this newsletter, we’ve approached the topic of probate from different angles; first as one advantage of estate planning, and also as an advantage of trusts. Today, let’s look at the topic from another angle: how we can make your life—and the lives of your heirs—easier by helping you choose and fund the appropriate trust (with the assistance of an estate planning attorney, of course).
If you die with a funded revocable trust in place, once the trustee has a certified copy of your death certificate, he or she can make distributions from the trust according to you wishes.
Contrast that straightforward sequence of events to what happens if you die without a trust: Your executor (or personal representative) must file a copy of your will with the probate court in every state in which you owned property. Unless your executor is an estate planning attorney, he or she will likely have to pay an attorney to do so. Probate takes time, thus delaying distributions to your heirs. We’ve seen people give up inherited timeshares rather than pay (and wait) to go through probate in the states in which timeshares are located.
Every day we help individuals determine which type of trust best suits the property they own, and every night these people sleep better knowing that their assets will be distributed in the way they want and without unnecessary hassle and fees. We’re happy to help you as well.
Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member FINRA/SIPC. Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.