Reply #74: Treasuries see ghost of yield curve inversions past

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-12-23T193704Z_01_N23474669_RTRIDST_0_MARKETS-BONDS-UPDATE-3.XML

CHICAGO, Dec 23 (Reuters) - U.S. Treasury debt prices jumped for a second straight day on Friday as a slide in new home sales and weak elements in the durable goods orders data for November sparked fresh doubt about the economic outlook.

The yield curve flattened to a wafer-thin level in the two-year and 10-year maturities while long bond yields, which respond to growth and inflation expectations, dropped to its lowest in over three months.

"The 'just right' Goldilocks economy took an early vacation this week as growth news turned squishy and price data were mixed," said economists at Goldman Sachs.

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"Faltering U.S. new home sales, reflecting shrinking housing affordability, call into question the notion of another year above-trend growth for U.S. consumer spending and real gross domestic product," said Robert Barbera, chief economist at Hoenig & Co. in Rye Brook, New York.

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The prospect of an inverted yield curve -- when two-year yields are above 10-year yields -- is being watched as a possible signal that recession will follow several months down the line.

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