On today’s show we are talking about the market for sovereign debt and what it means for investors.

We have a severe interest rate inversion where short term interest rates are higher than long term rates. The obvious question is “Why is that a problem?”

If you think about what a market interest rate says to investors, it communicates a perception of risk.

In a natural environment it stands to reason that you could predict the next three months or the next year with greater certainty than you could predict the next 10 years or the next 30 years.

If that is the case, why are short term interest rates higher than long term rates?

Why is the market rate for the one year Tbill 4.28% whereas the yield on the 10 treasury is at 3.9% and the 30 year treasury is at 3.8%?

What does that tell us about market sentiment? It says that there is much higher perceived risk in the short term than in the long term.

On today’s show we are going to look at signs of contagion that are not making headlines, but I believe you need to be paying attention to.


Host: Victor Menasce

email: podcast@victorjm.com