Robin Marshall has responded to Peter Warburton’s article titled ‘What does the flattening yield curve mean’.
The first paragraph ends with a perfectly reasonable question about the information content of a flattening yield curve and whether it signals the end of the US/UK expansion. However, the final question about buying bargain basement long-dated bonds seems mis-specified, since the flatness of the curve means an investor gets very little extra yield from buying long-dated bonds (eg, current US 30 year yield is about 3%, but the 10 year yields 2.85%, so pick-up is only 15bp for an extra 20 years of inflation and duration risk) ? It’s more likely to be a “ golden moment” to acquire 7-10 year bonds in that regard.
