I'm in disbelief!  The Fed is bumping up interest rates in the face of a strengthening economy and inflationary pressures, but the yield curve is also looking fully inverted past the 2-yr mark for the first time in this millenium (I think).  Macroeconomics isn't my strong point, but doesn't this worry you?

 

How can the yield curve be inverted?  This seems to present an arbitrage opportunity (buy 2-yr treasuries and sell an equal amount of 30-yr treasuries) UNLESS investors foresee recession or deflation after 2008.  The Fed blames it on a temporary technicality, but this inversion has lasted for at least the last few days and the curve's been flat for months now.

 

I'm really at a loss, post some comments if you have ideas about what's really going on!  Maybe it's time to move into foreign currencies until the government gets the twin deficits in check?