NEW YORK/LONDON (Reuters) – The U.S. Treasury yield curve inverted on Wednesday for the first time since June 2007, in a sign of investor concern that the world’s biggest economy could be heading for recession.
The inversion – where shorter-dated borrowing costs are higher than longer ones – saw U.S. 2-year note yields rise above the 10-year yield.
Data - Inflation - World - Trade - Conflicts
Weak economic data and low inflation around the world, global trade conflicts and political tensions in places such as Hong Kong have sparked worries about world growth, fueling market expectations of central bank interest rate cuts and triggering steep falls in government bond yields.
The U.S. curve inverted on Wednesday to as much as minus 2.1 basis points , a metric widely viewed as a classic recession signal. The last time this yield curve inverted was in June 2007 when the U.S. subprime mortgage crisis was gathering pace.
US - Curve - Recession - Years - Signal
The U.S. curve has inverted before every recession in the past 50 years, offering a false signal just once in that time.
The curve was last up 1.4 basis points.
Jeffrey - Cleveland - Principal - Economist - Investment
Jeffrey Cleveland, principal and chief economist at investment management firm Payden & Rygel in Los Angeles, said he is more optimistic about the timeline for a recession.
“We look at 2s/10s and the yield curve in general as long leading indicators,” Cleveland said. “Long because a long period can elapse between inversion and a recession. For example, 2s/10s inverted in December 2005 and the recession did not begin until December 2007: a full 24 months.”
Inversion - US - Yields - % - September
With the inversion, U.S. benchmark 10-year yields fell to 1.574%, the lowest since September 2016,...
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