(From Dec 3 post) “…On Wednesday, December 1, 2021, the eurodollar futures curve inverted again. And it turned itself upside down the same way it had back in 2018; first, flattening for months and noticeably flat for weeks going back to late October. And then, this week, now ugly and unnatural by the same colors, from late greens and into the blues.
Taken literally, that might seem to suggest problems manifesting sometime in 2025; who cares, right? But we know that’s not what inversion means. Like before, the market has judged the probability of trouble – not specific at this point – in the uncertain future to be greater than not; the chances of something not as-yet specified going wrong rather than everything going right, it’s now being thought and priced to be a better bet.
We don’t know what, exactly, this trouble is (I can guess, and have all this year) or when it can or will strike, right now we just know it is an entirely too-real risk sitting and waiting for us just over the observable calendar horizon outside the technical whites and reds of eurodollar futures.”
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