One of the most closely watched predictors for recession just yelped even louder.
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"Yield curve inversion won't signal doom", Jonathan Golub, chief US equity strategist at Credit Suisse, said in a note past year.
Meanwhile, yields on German 10-year bunds have turned negative for the first time in three years, which means investors are sufficiently spooked about the global economic outlook that they're willing to effectively pay the German government to hold their money.
"All anyone needs to do is read the first paragraph of the Fed press statement to see that the central bank has marked down its assessment of the economic landscape - the choice of words suggests far more than the tweaking that was done to the numerical projections", David Rosenberg, chief economist and strategist at Gluskin Sheff, said in his daily note Thursday. The broader S&P 500 index fell 1.9 percent.
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The last time a three-month Treasury yielded less than a 10-year Treasury was in late 2006 and early 2007, before the Great Recession made landfall in December 2007. High demand for bonds will, in turn, send yields falling. Some argue that technical factors have distorted the curve's shape and signaling capacity, particularly as crisis-era policy has tethered yields for the past decade.
When short-term yields climb above longer-dated ones, it signals short-term borrowing costs are more expensive than longer-term loan costs.
On rare occasions, some or all of the yield curve ceases to be upward sloping. "It's not just cyclical signs that a flatter yield curve tends to be a sign of weaker economic growth ahead, but that the secular change where rates around the world in all the developed countries have been remarkably low". When the curve started flattening early this morning, equities started heading south with the pace of selling accelerating when the curve inverted. The 10-year yield of 2.43 percent is still above the two-year yield of 2.31 percent.
"In many respects, the USA 10-year Treasury is still, in an low-yielding world, a high-yielding asset", Dryden said. But the three-month to 10-year spread is the Fed's preferred benchmark.
And he noted that on average, recessions occur 12 months after an inversion - not immediately. "All that is finally hitting the market with a reality check", she said.