2yr/10yr Treasuries Inverted for First Time in 12 Years
 

Markets are taking it kinda hard right now. (S&P down 39).

Have you acted because of this news (that was talked about yesterday on the front page of CNBC in the midst of the strong rally)? Just curious.

I've been in UBT since Aug 1

Recessions happen. If there is one on the horizon a year or so out, to me, that's the normal course of events. Will it happen? I have no idea. I find these inverted curves interesting facts. Are they predictive? Have been in the past, but who knows going forward. Two things are a given: 1. Markets overreact. 2. Short-term rates higher than long term rates is abnormal. It just doesn't make sense, at least to me.

That being said, I'm a day trader. I no longer try and predict what the markets are going to do. Been proven wrong too many times. (Been right many times, but bad timing.) Instead, I try (as best I can) to react appropriately to what the markets are already doing.

That approach has helped a lot. Quite a lot.

Recessions are almost always preceeded by an inverted yield curve. But an inverted yield curve, in and of itself, does not mean mean a recession is imminent. Correlation but not causation.

Its something like 1-2 years later on average right? People seem to think once we invert we go straight down which isn't exactly accurate.

Why now?
 

I was reading about the yield inversion 6 weeks ago.
Why did it only hit the market yesterday?

https://www.npr.org/2019/06/30/73747...ntent=20190630

i am waiting for a deep haircut in the equity markets and will be buying IBM and MSFT if they get hit. i like those 2 because they are basically software company's that deal in data, (the cloud). and that is where i think it's at going forward.

those 2 stocks will account for 50% of my portfolio, the other 50% is already being insured by physical gold.

What you're referring to is the 3mo/10yr inversion, which happened around the time you state, and has been inverted for some time now.

The 2yr/10yr just occurred and is fluctuating back and forth. Currently, it is not inverted.

BTW, yesterday, the 30yr bond fell below 2% for the first time ever.

https://i.ibb.co/chqXwwJ/Inversion.png

Amazon has a large cloud presence as well.

So much talk about the "inverted yield curve." If I didn't know any better, I'd think it was a kind of ED or maybe something like Peyronie's disease! Guess it's only the economy that needs Viagra.

Date ------1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr --10 Yr 20 Yr 30 Yr
08/01/19 2.11 2.14 2.07 2.04 1.88 1.73 1.67 1.68 1.77 1.90 2.21 2.44
08/02/19 2.11 2.12 2.06 2.02 1.85 1.72 1.67 1.66 1.75 1.86 2.16 2.39
08/05/19 2.07 2.08 2.05 1.99 1.78 1.59 1.55 1.55 1.63 1.75 2.07 2.30
08/06/19 2.05 2.08 2.05 2.00 1.80 1.60 1.54 1.53 1.62 1.73 2.03 2.25
08/07/19 2.02 2.04 2.02 1.95 1.75 1.59 1.51 1.52 1.60 1.71 2.01 2.22
08/08/19 2.09 2.07 2.02 1.96 1.79 1.62 1.54 1.54 1.62 1.72 2.02 2.25
08/09/19 2.05 2.06 2.00 1.95 1.78 1.63 1.58 1.57 1.65 1.74 2.03 2.26
08/12/19 2.09 2.06 2.00 1.94 1.75 1.58 1.51 1.49 1.56 1.65 1.92 2.14
08/13/19 2.05 2.04 2.00 1.96 1.86 1.66 1.60 1.57 1.62 1.68 1.94 2.15
08/14/19 1.98 1.98 1.96 1.92 1.79 1.58 1.53 1.51 1.55 1.59 1.84 2.03
Wednesday Aug 14, 2019 -Chart is From the www.treasury.gov

The 2yr. is still less than 10 yr. so not inverted. It did go inverted for a matter of a few minutes yesterday. Media over-reaction.

There have been seven recessions since 1962. If you examine the 10-year yield less the 3-month T-bill yield, you will note an inversion roughly 18 months (usually closer) prior to every actual recession. The 10s/3-month inversion provided a false signal once: 1965 (a recession didn't follow until about five years later). Currently this metric is inverted by 29 bps (0.29%). This time could be different. We'll see.

How could Fed funds at 2.25% cause a recession? Over the past few years, Fed funds have increased by over four percentage points.* In 1981, total debt** to GDP was roughly 160%. That number is now just shy of 350%. Adjusting for leverage, the Fed has hiked rates eight percentage points in 1981 terms, not 4 percentage points. This exercise oversimplifies things, given government debt has grown at a much quicker pace than consumer/corporate debt, but it's the easiest way to appreciate the fragility of today's levered economy.

*Atlanta Fed estimates the low in Fed funds was around a negative 2%, adjusted for QE

**govt/consumer/corp debt

This guy has an interesting take on the yield curves and recession.

The 2yr/10yr are now inverted by 3 bps. And the 3mo/30yr just inverted as well by a little over 1 bps.


https://i.ibb.co/72kMRTP/3mo-30yr.png