Futures dropped this morning on news of a brief 2-10yr inversion, 30yr falling to record lows, and recession fears. IMO, the driver is the EU-US rate differential rather than US economic outlook. Nonetheless, it is a strong indicator.

Question for the board, does inversion in this instance translate in the same way in today's environment as it did in the past?

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Posted by OleWarSkuleAlum

Huntsville, AL

Member since Dec 2013

10293 posts

Posted on 8/14/19 at 6:59 am to NC_Tigah

No because the fed purposefully is involved in buoying the economy.

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Posted by yatesdog38

in your head rent free

Member since Sep 2013

12737 posts

Posted on 8/14/19 at 7:47 am to NC_Tigah

no, but it is a significant event. I still think we see some stagnation in growth next year. I don't know that we see a recession. Maybe if the global economy completely goes full tank. It will be equity buying season for me.

There have been a bunch of other inverted yield curves in the last 18 months but this is the first for the 10-2. I don't have access to a bloomberg or any kind of data software anymore, but i'd like to see some other spreads.

This post was edited on 8/14/19 at 7:49 am

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Posted by LSURussian

Member since Feb 2005

126962 posts

Posted on 8/14/19 at 3:37 pm to NC_Tigah

It's interesting that both Janet Yellen and Alan Greenspan opined today that they believe this time the inverted yield curve is a false indicator of a coming recession in the U.S.

quote:
Former Federal Reserve Chairman Janet Yellen said the markets may be wrong this time in trusting the yield curve inversion as a recession indicator.

“Historically, it has been a pretty good signal of recession, and it think that’s when markets pay attention to it, but I would really urge that on this occasion it may be a less good signal,” Yellen said on Fox Business Network.

“The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields.”

When asked if the United States is headed into a recession, Yellen said “I think the answer is most likely no. I think the U.S. economy has enough strength to avoid that, but the odds have clearly risen and they’re higher than I’m frankly comfortable with,” she said.

Former Federal Reserve Chairman Alan Greenspan said Tuesday ‘there is no barrier’ to negative yields in the U.S.

“There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan said in a phone interview with Bloomberg.

“There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.”