Yet another recession warning just flashed red - a Treasury 'yield curve' just inverted for the first time since 2007
Reuters / Neil Hall
- The three-month to 10-year US Treasuries yield curve has inverted for the first time since 2007.
- US Treasuries yield curves are key indicators that credit markets fear recession.
- The Dow tumbled 400 points as yield curve inversion sparked growth concerns.
A keenly watched measure of market sentiment on recession has just indicated that recession is increasingly on the cards.10-year Treasury yields declined Friday, continuing from a more than one-year low which has led to the three-month and 10-year yield curve inverting, which Bloomberg saysis the first time since 2007, suggesting credit markets are fearful of US growth declining.Advertisement
It follows a Federal Reserve decision not to hike interest rates Wednesday which highlighted a the possibility of slower US growth in the coming year forecasting just one hike through 2021.A flat or negative yield curve suggests investors believe keeping your money in short-term bonds is more uncertain than bonds that pay off much later. If the long-term horizon looks riskier than the short-term one, it's a sign something's amiss in the economy.
The same happened with three and five-year spreads for the first time in 11 years in December. Concerns about global growth slowing and higher interest rates, coupled with simmering trade-war tensions, are thought to be behind the inversions.Whether that means a recession is likely in the next few years depends on numerous factors, but it's a stark sign of things to come from a usually emphatic bellwether.Advertisement
Rebecca Ungarino contributed to this report.
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