U.S. yield curve inverts for first time in 12 years, flags recession
The U.S. Treasury yield curve inverted on Wednesday for the first time since Jun...
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 12, 2019. REUTERS/Eduardo Munoz
The U.S. curve inverted on Wednesday to as much as minus 2.1 basis points US2US10=TWEB, a metric widely viewed as a classic recession signal. The last time this yield curve inverted was in June 2007 when the U.S. subprime mortgage crisis was gathering pace.
Jeffrey Cleveland, principal and chief economist at investment management firm Payden & Rygel in Los Angeles, said he is more optimistic about the timeline for a recession.
“I don’t think we have seen the bottom in yields yet as we continue on this path of just absolute increased uncertainty,” said Ellis Phifer, market strategist at Raymond James in Memphis. “I think potentially the bottom could be the 1.30%-1.35% in the 10-year.”
While the yield on nominal 30-year bonds had not yet broken below 2% for the first time ever, Treasury futures market signals indicated an expectation that it would do so soon. The implied yield on the 30-year Treasury futures contract expiring in September USU9 was 1.74% on Wednesday, near a record low.
That metric reverted back and then inverted again in May. Over that period, the 2- to 10-year curve did not invert.
(This story has been refiled to correct typographic error in 4th paragraph to make RIC for yield curve US2US10=TWEB instead of US2US10YT=TWEB)Read more: Reuters Top News
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