22 Jul 2005 Conundrum Solved?
Posted at 15:05h in The Friday BriefBack in February of this year Mr. Greenspan labeled the unusual condition of falling long-term rates and steadily rising short-term rates, a ‘conundrum’. The rates generally move in parallel. Yesterday, he told the Congress that the reason long-term bond yields have continued to fall while short-term rates have tripled over the past year was that global savings exceeded investment, inflation expectations are low, and the world economy is stable. He also debunked the theory that an inverted yield curve signaled an economic slowdown, calling it a “misconception.” He said “the quality of that signal has been declining in the last decade, in fact, quite measurably.”