S&P 500 In The Week When The U.S. Treasury Curve Inverted

Global markets spooked by recession fears | Business

Global markets spooked by recession fears | Business

Japan's Nikkei rebounded 1.1 per cent after a 3.0 per cent fall on Monday. On Monday, that yield curve was still slightly inverted.

Benchmark U.S. Treasury debt yields fell to their lowest since late 2017 on Monday and a gauge of world stocks dropped for a second straight session on persistent concerns over global economic growth.

US and Canadian benchmark 10-year government bond yields declined again Monday, and the yield curve between three-month Treasury bills and 10-year notes in both countries inverted further, as traders remained focused on deteriorating economic growth prospects.

Investors were evaluating last week's dovish pivot by the U.S. Federal Reserve, in which the central bank stunned investors by abandoning projections for any interest rate hikes this year.

"This is not a healthy sign, as bond-market watchers should know and equity-market obsessives should rapidly learn", he said in a note.

"I expect some correction to the latest rally in bonds".

Raymond James chief economist Scott Brown said he sees a 30 percent chance of a recession in the next 12 months based on how flat the yield curve is sitting at time of publication.

The U.S. Treasury Department will sell US$113-billion in coupon-bearing supply this week, including US$40-billion in two-year notes on Tuesday, US$41-billion in five-year notes on Wednesday and US$32-billion in seven-year notes on Thursday.

We're looking more at the deterioration in the global economy than we are at the USA economy as a leading explanation for Friday's market decline because investors had the opportunity earlier in the week to react to news that the outlook for the USA economy would likely be worse than previously expected when the Fed significantly lowered its economic forecasts and surprised investors that it would end its quantitative tightening policies by September 2019.

In some previous posts I incorrectly had the Fed Funds rate at 2.50.

The euro stood at $1.1305, having gained a tad on Monday after Germany's IFO Institute said its business climate index rose to 99.6, beating a consensus forecast of 98.5 and ending six consecutive months of decline. May said on Monday there was not yet enough support to put her Brexit deal to a third vote in the UK Parliament.

Oil prices fell, with concerns of a sharp economic slowdown overshadowing support from tighter supply due to OPEC's production cuts and US sanctions on Iran and Venezuela. USA crude futures traded at $59.26 per barrel, up 0.5 per cent on day, a tad below Thursday's high of $60.39, its highest since mid-November.

Brent futures were up 0.2 percent at $67.37.

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