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ARM's are on their way back
I'm going to take a moment to get technical and talk about the yield curve on US Government bonds, bills and notes; specifically, I'm going to address what an inverted yield curve is and why it's important to you.The yield curve is a graph that plots yields (that's an interest-rate adjusted return on a bond) vs. maturity length for the bonds that the U.S. Government issues when it borrows money.Here's a peek at the yield curve as reported by yahoo's finance site this morning:
Not very exciting, as curves go. It's almost flat -- it shows that the market expects about the same return on long-term, fixed interest rate securities as it does for short-term securities.Missing from this graph is the Fed Rate -- the rate at which banks borrow from one another overnight in the US banking system. Since June of 2006 it has stayed level at 5.25%, to which it was raised by 17 consecutive rate hikes as our economy recovered from 9/11.An inverted yield curve is one in which short-term yields are higher than long-term yields -- and it presents a question (put succinctly by the good people at Fidelity:
Why would long-term investors settle for lower yields while ... more

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