Money: Yield Curves Invert in U.S., U.K. as `Doom and Gloom' Spreads - PressFrom - United Kingdom
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MoneyYield Curves Invert in U.S., U.K. as `Doom and Gloom' Spreads

15:00  14 august  2019
15:00  14 august  2019 Source:   msn.com

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An inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. Historically, inversions of the yield curve have preceded many of the U . S . recessions.

The U . S . Treasury yield curve just inverted for the first time in more than a decade. It’ s a moment that the world’ s biggest bond market has been thinking Rather, the difference between three- and five-year Treasury yields dropped below zero, marking the first portion of the curve to invert in this cycle.

Yield Curves Invert in U.S., U.K. as `Doom and Gloom' Spreads © Reuters

The stream of investors seeking refuge in the safest parts of the market has triggered yet another recession warning, with yield curves inverting from the U.S. to the U.K.

The gap between two- and 10-year yields dropped below zero on both sides of the Atlantic after a wave of soft economic data globally. Weaker-than-forecast Chinese retail sales and industrial output set the mood for the markets, with data later in the day showing Germany’s economy contracted, adding to the gloom.

Yield Curves Invert in U.S., U.K. as `Doom and Gloom' Spreads © Bloomberg U.S. and U.K. yield curves invert for the first time since the financial crisis

“The bond market is saying central banks are behind the curve,” said Marc Ostwald, global strategist at ADM Investor Services in London. “It’s all doom and gloom on the global economy.”

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Inverted yield curves have been relatively rare, due in large part to longer-than-average periods between When the spread between U . S . Treasuries (a risk-free investment) and higher-risk Inverted Yield Curve Impact on Equity Investors. When the yield curve becomes inverted , profit

The flattening yield curve is an indicator of a recession and bear market to come. The last six US recessions have all been preceded by an inverted FINSUM : Yes a flattening yield curve is a bad sign, but remember that it takes, on average, several months (i.e. ~18 months) from when the yield

Global Slowdown

Investors have been driving into areas of the bond market that still offer a positive yield, typically longer-dated assets that offer better returns, in order to protect their funds from a global slowdown in growth. It’s an ominous development because it suggests the prizing of safety over return: the curve is typically upward-sloping, as an investment over 10 years is expected to pay more to compensate for the longer-term risk.

U.S. 10-year yields dropped eight basis points to 1.62%, while those on two-year Treasuries fell three basis points to 1.63%. Thirty-year yields fell to a record low. In the U.K., 10-year yields dropped two basis points to 0.475%, while those on two-year bonds rose one basis point to 0.478% even as inflation jumped above the Bank of England’s 2% target.

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It’ s a moment that the world’ s biggest bond market has been thinking about for the past 12 months. Rather, the difference between three- and five-year Treasury yields dropped below zero, marking the first portion of the curve to invert in this cycle. In fact, I wrote a week ago that the spread between.

The yield curve is the most widely used measurement of the relationship between interest rates of the U . S . government’ s debt obligations. Normally the curve is ascending, with more-volatile long-term bonds having higher yields than short-term obligations.

This move has been a long time coming, and reflects a significant escalation of growth concerns. The two-to-10-year curve has been on a gradual flattening trend for more than two years on rising doubts about the health of the global economy and weak inflation. Another widely watched recession indicator, the yield difference between three-month and 10-year Treasuries, inverted in March and has been negative much of the time since.

“Where the U.S. leads, the U.K. follows,” said Adam Dent, U.K. rates strategist at Banco Santander SA. “The market has previously been very reluctant to abandon the idea that rates will eventually normalize.”

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The curve isn’t the only thing flashing high alert. The Federal Reserve Bank of New York’s index showing the probability of a U.S. recession over the next 12 months is close to its highest level since the global financial crisis, at around 31%.

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