This post was originally posted here. The writer is a veteran community member and blogger on InvestingNote, with username known as kyith.
Yesterday, I posted the latest yield that you can get if you purchase the Singapore Savings Bonds.
And a few readers main comment is that the yield curve is inverting and we should be careful.
As you can see from the 1 year and 10 year SGS bond yield, the yields look to be narrowing.
And if the yield inverts, it is a really bad thing.
I think there is validity about respecting the yield curve, but as an indicator, it might not be the most reliable.
My understanding of the yield curve
The yield curve shows the prevailing interest yield for different duration of the countries government debts.
For debts a longer tenure debt has more risk, because they are subjected to interest rate fluctuations, credit events, inflation, economic factors. Thus, when risks are higher, the interest rate investors demand should be higher. …