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Tiagong US Yield Curved Inverted for longest period now..break 1978 record now at 625 days...huat la huat la
- Thread starter k1976
- Start date
NEW YORK, March 21 (Reuters) - A key bond market signal of an upcoming recession has flashed red continuously for the longest time ever, even if the U.S. economy is far from showing signs of a growth contraction.
The part of the Treasury yield curve that plots two-year and 10-year yields has been continuously inverted - meaning that short-term bonds yield more than longer ones - since early July 2022. That exceeds a record 624 day inversion in 1978, Deutsche Bank said in a note on Thursday
The part of the Treasury yield curve that plots two-year and 10-year yields has been continuously inverted - meaning that short-term bonds yield more than longer ones - since early July 2022. That exceeds a record 624 day inversion in 1978, Deutsche Bank said in a note on Thursday
A 2/10 curve inversion is a time-honored signal of an upcoming recession. Short-term bonds yield more than longer maturities because investors expect interest rates to remain high in the short term as the Federal Reserve battles inflation, while long yields are lower on expectations the central bank will cut interest rates to stimulate a weakening economy.
An inverted yield curve is also by itself typically bad for economic activity and financial markets because higher short-term yields lift borrowing costs on consumer and commercial loans, while lower compensation for long-term lending discourages risk-taking.
An inverted yield curve is also by itself typically bad for economic activity and financial markets because higher short-term yields lift borrowing costs on consumer and commercial loans, while lower compensation for long-term lending discourages risk-taking.
Reuters Graphics
This time around, however, even if the curve remains deeply inverted after a sharp increase in interest rates, a recession has not materialized and the U.S. economy continues to surprise on the upside. This week the Fed kept its outlook unchanged for three interest rate cuts this year, as it expects inflation to decline despite still strong economic activity.
This is partly because of high consumer savings as the economy exited the Covid-19 pandemic, which provided a buffer against rising borrowing costs, Jim Reid at Deutsche Bank wrote in the note. Also, the Fed managed to contain last year's banking turmoil - which was a result of changes in the shape of the yield curve - by offering emergency liquidity measures.
"So far so good," said Reid.
"However, an inverted yield curve should ultimately be a significant headwind for an economy, as capitalism works best when there is a positive return for taking more risk with lending and investments further out the curve," he said.
"So far so good," said Reid.
"However, an inverted yield curve should ultimately be a significant headwind for an economy, as capitalism works best when there is a positive return for taking more risk with lending and investments further out the curve," he said.
https://www.reuters.com/markets/rat...witzerland-starts-clock-rate-cuts-2024-03-21/
The Swiss National Bank (SNB) lowered its key rate to 1.5% from 1.75%, with traders responding by pushing government borrowing costs across Europe lower as the continent's Stoxx 600 (.STOXX), opens new tab share index hit a fresh record.
- SNB delivers surprise quarter point rate cut
- Bond and equities rally; ECB rate cut bets rise
- European central banks may need to wait on the Fed - investors
The Swiss National Bank (SNB) lowered its key rate to 1.5% from 1.75%, with traders responding by pushing government borrowing costs across Europe lower as the continent's Stoxx 600 (.STOXX), opens new tab share index hit a fresh record.
https://www.reuters.com/markets/europe/global-markets-view-europe-2024-03-22/
A look at the day ahead in European and global markets from Rae Wee
Markets have been betting on a dollar downturn for months on the view that U.S. rates would eventually have to fall at some point this year. Until now, that has been wishful thinking.
The yen and the yuan were the latest to fall prey to a resurgent dollar on Friday, with the Japanese currency slipping deeper into intervention territory and the Chinese yuan breaching a key level against the greenback.
A look at the day ahead in European and global markets from Rae Wee
Markets have been betting on a dollar downturn for months on the view that U.S. rates would eventually have to fall at some point this year. Until now, that has been wishful thinking.
The yen and the yuan were the latest to fall prey to a resurgent dollar on Friday, with the Japanese currency slipping deeper into intervention territory and the Chinese yuan breaching a key level against the greenback.
NO END IN SIGHT
With the dollar having been in the driver's seat for the most part of the past two years since the Federal Reserve kicked off its flurry of rate hikes, analysts had, at the end of last year, expected its rally to stall come 2024.Yet, any fall in the greenback has so far been short lived. Its latest move lower came after the Fed this week maintained its projection for three rate cuts this year.
In less than 24 hours, however, the dollar was back in favour after a surprise rate cut from the Swiss National Bank and a dovish tilt from the Bank of England (BoE) sparked selling
in the Swiss franc and sterling for dollars.
That ramped up expectations for a June rate cut by the European Central Bank and the BoE , but less so for the Fed.
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