|
|
On 28 March, for the first time since 2006, the yield curve between U.S. five-year and 30-year treasury notes inverted, usually a signal that a recession is looming.
The 2006 inversion preceded the Great Recession.
Normally, yields on long-term notes are higher than those for shorter terms. That indicates investors’ faith in the short-term economic future.
When short-term interest rates exceed longer-term yields, the spread or “curve” between them is said to “invert,” signaling a darker near-term view among investors.
Overnight on Monday, the yield curve briefly inverted, with five-year treasury yields reaching 2.6361 percent while the 30-year yield dipped to 2.6004 percent.
The inversion soon corrected, with five-year rates edging down to 2.548 percent and the 30-year note returning 2.552 percent—still razor-edge close, but no longer inverted.
Meanwhile, the benchmark spread between the two-year and 10-year yields remained positive.
“With the Fed set to hike into restrictive territory, the curve will invert,” Seth Carpenter, chief global economist at Morgan Stanley, told CNBC.
“As has always been the case in the past, markets will debate whether an inversion presages a recession,” he said. “A policy mistake that causes a recession is clearly possible, but our baseline is that an inversion without a recession is more likely.”
TREND FORECAST: Regardless of the yield curve, how fast and how deep the recession will be will largely depend on how high and how fast the Federal Reserve raises interest rates, and how fast and how high inflation rises.
As we note above, the COVID War has taken a devastating toll on the global economy that is not being recognized nor reported. And while the “Bigs” have gotten bigger with merger and acquisitions and stock buy-backs at all-time highs, on Main Street, increasing economic hardship prevails… and will worsen.
Indeed, the facts are in the numbers. See the following article: “THIRD OF AMERICANS EXPECT WORSE TIMES TO COME.”