88.1 Uh Oh! The Eurodollar Has Inverted (Again)

———Ep 88.1 Summary———
When the US Treasury yield curve inverts it is a warning that recession is on the horizon. What about when the Eurodollar Futures yield curve rolls over on its back? Not good news either. Would you believe that there’s a kink in the curve now? Would you believe it’s not great news?

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———Ep 88.1 Topics———

00:55 A Eurodollar futures curve is pregnant with insight about the future path of the economy.
01:28 Eurodollar futures represent the expected path of short-term rates (LIBOR) in the future.
04:23 Inverted yield curves presume future rates will be lower than what central bankers expect.
06:45 In June 2018 the Eurodollar futures curve inverted signaling caution and concern.
08:36 The June 2018 inversion was not an isolated warning in money / collateral markets.
10:32 December 2020 had ‘inverted’ – but in a manner suggesting a LIBOR spike.
12:44 December 2021 has ‘inverted’ – but in a manner suggesting a LIBOR spike.
14:37 More importantly, the Eurodollar curve is dead flat – saying the future isn’t bright.
17:39 The Eurodollar curve’s flatness and kink means there isn’t a flood of money available.

———Ep 88.1 References———

Eurodollar Curve Quirk Trivia, But Not Trivial To Anti-Inflation: https://bit.ly/2UFv51P
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7


Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins. Podcast intro/outro is “Cupcake Delivery” by Dylan Sitts from Epidemic Sound.