Author Topic: A Recession Warning Sign? Part of U.S. Yield Curve Inverts for First Time Since  (Read 177 times)

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Offline Ptarmigan

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A Recession Warning Sign? Part of U.S. Yield Curve Inverts for First Time Since 2006
https://finance.yahoo.com/news/recession-warning-sign-part-u-040605271.html

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(Bloomberg) -- Treasuries slumped anew to send a widely-watched part of the U.S. yield curve to its first inversion in 16 years. The curve is flattening as investors bet the Federal Reserve will tighten policy rapidly enough to risk a sustained slowdown in growth.

U.S. five-year yields climbed nine basis points to 2.63%, rising above those on 30-year bonds. Shorter maturities have been selling off faster than their longer-dated peers this year as investors ratchet up expectations the Fed will hike rates to combat inflation. The spread between five- and 10-year Treasuries inverted earlier this month.

“Fed officials haven’t pushed back on aggressive market pricing yet, putting higher yields and flatter curves as the momentum play for now,” said Prashant Newnaha, an Asia-Pacific rates strategist at TD Securities in Singapore.

The yield curve inverts. The last time that happened was in 2006. Could we see another recession coming?
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Offline Ptarmigan

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he Yield Curve Inverts: What Happens Next
https://www.zerohedge.com/markets/yield-curve-inverts-what-happens-next

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Shortly before the close on Thursday, the closely-watched 2s10s yield curve, better known as the recession harbinger, inverted again for the second time in three days, and this time it will likely fail to bounce as the US slides ever closer to its recession D-Day.

To be sure, the Fed and most of permabullish sellside strategists have spent most of their time in recent days to "explain away" why the yield curve doesn't actually matter, with the Fed going so far as penning an absolutely idiotic paper titled "(Don’t Fear) The Yield Curve, Reprise", in which the authors who have never had a real job in their lives reference FDR in making the point that the 2s10s is only notable in that "it can only make things worse if investors not only fear the prospect of a recession, but at the same time, are spooked by that fear itself, which is mirrored in inverted term spreads." Instead of addressing a level of stupidity that once upon a time was prohibited at the Fed, we will merely show a chart comparing the 2s10s and superimpose the Consumer Optimism Gap (as defined by the spread between the Conference Board Expectations and Current situation), to show the clear correlation and that a plunge in the 2s10s coincides with a collapse in optimism... and the start of a recession.

Not convinced? That's ok, because thanks to DB's Jim Reid we have a full presentation (available to professional subs) which shows exactly what happens after every single inversion. Below we excerpt some of the key findings:

1. Every recession in the last 70 years has only happened AFTER the 2s10s has inverted. We have now seen an inversion on March 29th intra-day and again on March 31. History would say US recession risks now elevated 12-24 months out.

Very technical, but worth reading. 2s10s treasury yields inverting is a sign a recession will happen or is going to happening.
Never interrupt your enemy when he is making a mistake.
-Napoleon Bonaparte

Allow enemies their space to hate; they will destroy themselves in the process.
-Lisa Du

Offline Articulate Ape

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Democrats and recessions go hand in hand.
Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety. ~ Benjamin Franklin

Offline Ptarmigan

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Goldman: "Is The Recession Signal Once Again Hiding In Plain Sight?"
https://www.zerohedge.com/markets/goldman-recession-signal-once-again-hiding-plain-sight

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Two weeks ago, Goldman's head of hedge funds sales Tony Pasquariello unexpectedly took a contrarian position to the conventionally bullish house view, warning that over the next few weeks, "he called the market lower." So far he has been spot on, and stocks indeed are now lower than they were at the end of March as the retail driven melt up that started in mid-March has once again collapsed.

So what happens next? Well, it depends on whom one listens to: Goldman or Goldman, because while the bank's traditionally permabullish chief equity strategist (for common consumption) David Kostin continues to push the bank's retail clients to buy whatever Goldman has to sell, and as we noted on Friday, Goldman has been selling a lot...

There are warning signs of a recession.

Never interrupt your enemy when he is making a mistake.
-Napoleon Bonaparte

Allow enemies their space to hate; they will destroy themselves in the process.
-Lisa Du

Offline Ptarmigan

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Top Washington Think Tank Warns Global Recession Could Arrive Before End Of 2022
https://www.zerohedge.com/economics/top-washington-think-tank-sees-global-recession-arriving-end-2022

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The timeline for the looming stagflationary recession continues to creep forward, with the Peterson Institute for International Economics warning that global growth is set to slow dramatically, and warning that "an even more abrupt tightening of monetary policy that causes asset prices to fall sharply and consumers to pull back, combined with a greater slowdown in China than currently expected, could push the economy into recession by the end of this year."

Last week, Deutsche Bank spooked trading desks when it became the first major bank to predict a US recession would strike before the end of 2023, echoing a little seen call from BofA's CIO who predicted a recession as soon as the second half. But now, one of Washington's most closely watched think tanks believes that amid a sharp stagflationary slowdown in 2022, a global recession could arrive as soon as later this year.

Of course, the PIIE assessment was written prior to Tuesday's CPI print, which came in at the hottest rate in more than 40 years. The print was seen as cementing the odds of a 50bps Fed rate hike next month.

But that doesn't change much. Now that the Fed's rate-hike liftoff is in the rear-view mirror, it's worth bringing up this old chart, which shows that the countdown to every recession is triggered by a rate hike from the Fed.

Peterson Institute for International Economics thinks a recession could start before 2022 ends.
Never interrupt your enemy when he is making a mistake.
-Napoleon Bonaparte

Allow enemies their space to hate; they will destroy themselves in the process.
-Lisa Du