Does the Yield Curve Matter?

Published on
July 23rd, 2019
33 minutes

Does the Yield Curve Matter?

The Interview ·
Featuring Glenn Reynolds and Vincent Catalano

Published on: July 23rd, 2019 • Duration: 33 minutes

Glenn Reynolds, CreditSights' chief global strategist, tells Vincent Catalano, CIO of Redmount Capital Partners, that the inversion of the yield curve is not necessarily pointing towards a recession. According to Reynolds, we have not seen the credit market distress that we did when the curve inverted in past cycles. He also says that the health of bank balance sheets makes a recession less likely. On the flip side, Reynolds believes the trade war between the US and China could be the catalyst for further economic weakness. Filmed on June 27, 2019 in New York.



  • jr
    jenny r.
    24 July 2019 @ 03:30
    Yes, agree we were saved (in many ways) by the Texas shale oil guys. They bought us the time we need to develop more affordable electric vehicles. My guess no big problems until around 2025 when/if oil prices spike up again, depending on Asian demand increases. Love my Honda Clarity plug-in so I'm using a fraction of the oil I used to.
    • AC
      Andrew C.
      30 July 2019 @ 03:25
      From where does your electricity come? Mine would come from gas, slightly better but still not great. But gas is cheaper (at least in this part of the world)
    • JA
      Jesse A.
      7 February 2020 @ 20:55
      @Andrew, 50% of my electricity in WA comes from hydro, but even if it was 100% coal it'd still be more efficient to electrify transportation in the long run because modern power plants are vastly more efficient than modern car engines (> 50% vs < 25%). Plus it concentrates the pollution away from where people live and is just way more flexible going forward in this energy revolution.
  • GF
    Gordon F.
    23 July 2019 @ 21:02
    Glenn says that the US banks are very strong, but with all the BBB debt out there, just one downgrade away from junk, and much of it cov-lite, I wonder how much of a downgrade the banks could handle. Clearly, a lot of that debt is not held by banks, but by pension funds etc. And I totally recognize that Glenn knows a LOT more about this than I do, but I can't help feeling that the system - banking and otherwise - is more fragile and vulnerable than he has described here. And I don't care how solid the US banks are, if there is a banking crisis in China and/or Europe, and foreign banks - DB and others - aren't good for their counter-party risk on their hundreds of trillions of derivatives, I simply don't have confidence that we could ride it out.
    • EF
      Eric F.
      24 July 2019 @ 02:07
      I’m with you Gordon, this guy has forgot more than I’ll ever know about finance, but I was a little shocked at how easily he dismissed potential potholes. I think this market is like a juiced up body builder. Looks great from the outside but the heart is overloaded and organ failure is imminent. Just a little too much stress and poof! Maybe experience counts against you here, and you look at normal indicators but everything has been so distorted. Clearly a super bright and experience guy, but I don’t buy what he’s selling here.
  • LT
    Lampros T.
    23 July 2019 @ 11:44
    At -4:20 Glenn Reynolds says "Pain Trade". What is a Pain Trade?
    • CB
      Chris B.
      23 July 2019 @ 15:51
      when the majority of the market is positioned one way, and then the market goes in opposite direction. Market inflicts the most pain to the most traders whenever possible
    • LT
      Lampros T.
      24 July 2019 @ 00:48
      @Chris B. Hmmm, so a Pain Trade is a popular trade?
    • SB
      Salvatore B.
      24 July 2019 @ 01:32
      It is basically whichever outcome that will cause the most pain to the most people. So it is more like going in the opposite direction of what the most popular trade is today
    • LT
      Lampros T.
      24 July 2019 @ 01:54
      Thank you, both of you! @Chris B. and @Salvatore B.
  • gg
    georgy g.
    24 July 2019 @ 00:07
    Excellent. Thoughtful. Causation not correlation. No Armageddon. No perma bear. No mention of bitcoin. What more to ask.
  • RM
    Ryan M.
    23 July 2019 @ 23:45
    All I hear is, "This time is different"
  • DV
    Donald V.
    23 July 2019 @ 22:06
    oh god, I'm with cliff A. on this. There is no such thing as dry powder or cash on the sidelines. Rest of the conversation is amazing.
  • AM
    Artur M.
    23 July 2019 @ 13:48
    Interesting, thanks
  • TJ
    Terry J.
    23 July 2019 @ 13:22
    More valuable insights from a new analyst (for my eyes and ears). I really enjoyed listening to Glenn, and also hearing the views offered by Vincent Catalano (whom I didn't know before either). A great quote, "The Japanification of everything."
  • DH
    Daniel H.
    23 July 2019 @ 07:42
    Great interview.