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“The Term Spread As A Predictor”: Comments — Brian Romanchuk

Summary:
I just saw a reference to a recent article by Dean Parker and Moritz Schularick: “The Term Spread as a Predictor of Financial Instability.” The article use the Macrohistory Database by Jordà, Schularick, and Taylor to look at the behaviour of the term spread (slope) between the 3-month rate and the 10-year bond yield in a number of countries over a long history around recession/financial crisis events. As expected, the slope inverts ahead of the event. They then looked at adding other factors to create a financial crisis predictive model. My article here are more general comments about the term spread behaviour.Bond Economics "The Term Spread As A Predictor": CommentsBrian Romanchukhttp://www.bondeconomics.com/2021/12/the-term-spread-as-predictor-comments.html

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I just saw a reference to a recent article by Dean Parker and Moritz Schularick: “The Term Spread as a Predictor of Financial Instability.” The article use the Macrohistory Database by Jordà, Schularick, and Taylor to look at the behaviour of the term spread (slope) between the 3-month rate and the 10-year bond yield in a number of countries over a long history around recession/financial crisis events. As expected, the slope inverts ahead of the event. They then looked at adding other factors to create a financial crisis predictive model. My article here are more general comments about the term spread behaviour.
Bond Economics
"The Term Spread As A Predictor": Comments
Brian Romanchuk
http://www.bondeconomics.com/2021/12/the-term-spread-as-predictor-comments.html
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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