Friday was not pretty.
For the first time since 2007, the long-term yields fell below the short-term yields (3 months USA Treasury bills (yield-2.46%p.a.) vs. 10-year Treasury notes (yield-2.45%p.a.)). This red-flag event is call an [highlight_sc bg_color=#21c2f8 text_color=#ffffff border_color=]inverted yield curve[/highlight_sc] and is a reliable recession predictor.
To be clear, yields DROP as investor interest GOES UP. That may not be intuitive, but higher demand means investors will pay a for a note with a lower yield just to own it. On Friday, the 10-yr Note dropped below the 3-month because investors desire the safety of long-term notes and are willing to earn less for it (lower yield) than a 3-month. So, at this point, you’ll earn more on a 3-month note. This is NOT bullish and investors should be careful.
Set your stops.
Limit your exposure.
Look for pockets of strength.
Nothing wrong with cash.
Twitter Chatter
Stocks Fall as Bond Market Flashes a Recession Warning https://t.co/q7hZIepeKx
— ryan 🦏 (@ryanmathews) March 24, 2019
S&P 500 could fall 40% as yield curve inverts, says analyst of one of 2018’s best hedge-fund returns https://t.co/t5dGVct1NV
— ryan 🦏 (@ryanmathews) March 24, 2019
The yield curve is inverted again. Why does this matter? The last 9 recessions recessions in the US were all preceded by an inverted yield curve (1-yr yield > 10-yr yield). If history repeats, we could see a recession begin w/in the next 8-24 months (avg lead time = 14 months). pic.twitter.com/fOAnYz6xGQ
— Charlie Bilello (@charliebilello) March 24, 2019
The Inverted Yield Curve: Another Viewpoint https://t.co/Peh2cDaLa1
— Seeking Alpha (@SeekingAlpha) March 24, 2019
It finally happened.
The yield curve (3-month bills/T-note) has inverted. If it stays that way, on average, for a quarter, history suggests we see a recession within 18 months. https://t.co/L5OIwy2GbK pic.twitter.com/enw70sG7zd
— Matt Phillips (@MatthewPhillips) March 22, 2019
volcano - NIKONANDY/GETTY IMAGES
