Wonk Attack: Interest Rate Spreads & LEIs

Thursday, December 20, 2007 | 02:00 PM

I have previously mentioned Paul Kasriel's work with interest rate spreads and leading economic indicators.

Paul notes that if you don't like the reconfigured LEIs -- and I was critical of the white wash the cheerleaders at the Conference Board did to cover up the inverted yield curve -- you can still derive value from them.

His suggestion: Corroborate the LEI signals by also looking at the negative spread between the yield on the Treasury 10-year security and the federal funds rate (on a four-quarter moving average basis) and a year-over-year contraction in the quarterly average of the CPI-adjusted monetary base.

Let's call these two charts the Kasriel Recession-Warning Indicator:
>

Leis_year_over_year

>
The 1966 LEI signal was false, but the Rate Spread should have kept you out of trouble.
>

Interest_rate_spread

>

Regardless, the combo of both of these have flipped negative, suggesting that the economy is slowing down . . .

>


>

Source:
Recession Imminent? Both the LEI and the KRWI are Flashing Warning
Paul L. Kasriel
Northern Trust March 22, 2007
http://tinyurl.com/2p2ftr

Thursday, December 20, 2007 | 02:00 PM | Permalink | Comments (12) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00e54fbef9e18834

Listed below are links to weblogs that reference Wonk Attack: Interest Rate Spreads & LEIs:

Comments

Well, the article is from March and one thing makes me curious: I thought the Heli-Ben is printing money like there is no tomoorrow. M3 is estimated to grow at double digit rates. How comes that the CPI-adjusted monetary base ist shrinking?

Posted by: egghat | Dec 21, 2007 9:59:36 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner