Entire Yield Curve Inverts, 30-Year Long Bond Yield Dives to Record Low

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The stock markets are getting clobbered and bonds are on fire as recession fears escalate.

30-Year Bond Yield Smashes Through Record Low

The 30-year long bond yield crashed to 2.024% this morning and is now just a tad higher.

The previous record low 30-year long bond yield of 2.10% was on July 8, 2016 shortly after the UK voted for Brexit (June 23, 2016).

Long Bond Yield Down 51 Basis Points Since July 31

On July 31, Fed Chair Jerome Powell made a speech he is going to regret. After the FOMC decision Powell called the rate cut a "Mid-Cycle" Adjustment.

I mocked the call then and did so again on August 6 when St. Louis Fed President James Bullard, a dove, Pimped the "Mid-Cycle Adjustment" Thesis.

Amusingly, Bullard professed "The 10-year yield remains above the two-year yield, likely because markets are anticipating future policy moves by the FOMC, and so we are not seeing an intensification of the yield curve inversion so far."

Earlier today, ZeroHedge commented that the 2s10s Spread inverted, but if so, it was fleeting. I think there is too much emphasis on that spread given the 30-Year to FF spread is now inverted and the 5-year FF spread is 63 basis points inverted.

Recession Fears

Recession fears have surfaced again.

As of 12:20 PM, S&P futures are down 86 points (3.0%), the Nasdaq is down 236 points (3.0%), and the Dow is down 721 points (2.7%).

One Day Wonder

Yesterday, Trump delayed Tariffs and the stock market went on a huge rally.

In Trump Chickens Out, Delays Trade War Tariffs to Save Holiday Season I commented:

Stock Market Reaction

The Dow is up 400 points (1.6%) with the S&P 500 up 50 points (1.8%) and Nasdaq up 47 points (2.2%).

Bond Market Reaction

The bond market reaction is interesting. The 5-year yield is up 7 basis points.

The 10-year yield is up 4 basis points and the 30-year long bond is up a just 1 basis point, a mere 4 basis points from a new record low yield.

Trust the long bond.

Long Bond Screaming Recession

That one-day wonder was even faster than I expected.

Here's the message: Recession.

Meanwhile, note that a Global Manufacturing Recession has started and Trump's tariff policy made matters much worse.

Note that the normal Lead Time Between Manufacturing Recessions and Full Recessions is zero quarters.

A recession may have started already.

Mike "Mish" Shedlock

Comments (37)
No. 1-16
Tony Bennett
Tony Bennett

My tell for when things about to get VERY interesting - Larry Kudlow throwing in the towel.

Brother
Brother

There is no recession. This is being played by the Anti Trump agenda and the money manipulators that is causing high volatility and will continue.

Irondoor
Irondoor

Dow down 600. Time for a Tweet. Wonder what it will be this time? I'm beginning to realize that the "Trump Put and the Fed Put" may be out of belief until after Sept.

thimk
thimk

just heard Rush L state on daily talk show that recessions could be a self fulfilling prophecy.

Lost_Anchor
Lost_Anchor

Yield curve inversion doesn't mean anything when its caused by the Fed manipulating longer maturities.

Lots of people warned dim-wit Bernanke that his banana republic policies would cause price discovery problems and eventually shut down the Treasury market. But Bernanke is an idiot "professor" who would spout endless equations that proved he didn't know what he was doing.

Japan saw its JGB market collapse in the wake of QE/ZIRP -- even though BoJ called it something else. Bernanke did the same stupid policy as the BoJ -- the Fed lost control of both the Treasury market AND the money supply, and just as in Japan banks are going to pay big time.

That is what a failed Treasury market looks like. Its a disaster for big banks.

Mish is a general fighting the last war, constantly parroting what the yield curve would be telling us IF it was still market priced. It isn't