3-month and 10-year US Treasury inverted today

bloomberg.com

8 points·dragontamer··4 comments

Under normal economic conditions, loaning money for longer-periods of time should result in higher interest payments than loaning money for a short period of time.

For one major benchmark, this is no longer true. The 3-month US Treasury and 10-year US Treasury is now inverted, where the 3-month Treasury yields a higher interest rate than the 10-year.

This is one of the more reliable indicators of an upcoming recession. There's a lot of studies for why the yield curve is a leading-indicator of recessions, but it gets pretty complicated to explain. (IE: I actually don't know the reason, but there's plenty of citations available online :-) )

This seems to have been a sudden shift downward of the US 10-year Treasury. Yesterday's 10-year was trading at 2.54%, but apparently dropped 10-bps today (not yet reported on Treasury.gov yet, only being reported by Bloomberg right now)

https://www.treasury.gov/resource-center/data-chart-center/i...

Yes, a lot of people in finance say it's been over 10 years so a recession should happen soon. But nobody says what are going to be the triggers. Last time it was sub-prime loans and mispriced derivatives. But this time? Trade war? Government deficits? China's credit crisis? Low yields pushing savers to riskier investments? Nobody seems to know.

Behind The Curve from Planet Money talks with Duke Professor Campbell Harvey about whether or not to worry about yield curve inversion in today's economy - https://www.npr.org/sections/money/2018/12/04/673429096/behi...

Correct me if I'm wrong, but he says not to worry yet. And adds to look at other indicators like volatility and not just 1 indicator.

See https://www.bloomberg.com/news/articles/2019-03-23/-fatal-tr...

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