U.S. yield curve inverts for first time in 12 years, flags recession

[Eugene]

Source: Reuters

BUSINESS NEWS AUGUST 14, 2019 / 12:30 PM / UPDATED 5 MINUTES AGO

U.S. yield curve inverts for first time in 12 years, flags recession

Gertrude Chavez-Dreyfuss, Dhara Ranasinghe
4 MIN READ

NEW YORK/LONDON (Reuters) - The U.S. Treasury yield curve inverted on Wednesday for the first time since June 2007, in a sign of investor concern that the world’s biggest economy could be heading for recession.

The inversion - where shorter-dated borrowing costs are higher than longer ones - saw U.S. 2-year note yields rise above the 10-year yield.

Weak economic data and low inflation around the world, global trade conflicts and political tensions in places such as Hong Kong have sparked worries about world growth, fueling market expectations of central bank interest rate cuts and triggering steep falls in government bond yields.

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.

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Read more: https://www.reuters.com/article/us-usa-bonds/u-s-yield-curve-inverts-for-first-time-in-12-years-flags-recession-idUSKCN1V41SK

[Eugene]

1. Fed not on red-alert after yield-curve inversion

Source: Marketwatch

Fed not on red-alert after yield-curve inversion

Published: Aug 14, 2019 1:04 p.m. ET

Officials will wait until closer to Sept. 17-18 meeting to decide course of action

By GREG ROBB
SENIOR ECONOMICS REPORTER

The Federal Reserve isn’t moving into recession fighting mode after the U.S. Treasury yield curve inverted Wednesday for the first time in a decade, and won’t decide on a course of action until much closer to the next interest-rate policy meeting on September 17-18, economists said Wednesday.

“I wouldn’t look for a Fed message this week or next,” said Michael Gapen, chief U.S. economist at Barclays.

Only two weeks ago, Fed Chairman Jerome Powell stressed that the central bank’s July rate cut was a mid-course correction only. Official are not going to be so quick to abandon that strategy, even if the market is signaling it is not enough, economists said.

Fed officials were divided last month on the need for an interest rate cut, with two policy makers dissenting against the move. Those opposing the rate cut are skeptical that the yield curve is a valid signal of a recession.

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Read more: https://www.marketwatch.com/story/fed-not-on-red-alert-after-yield-curve-inversion-2019-08-14