Recession Signal Getting Louder: 5-Year Yield Inverts With 3-Month Yield

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The yield curve is inverted in 11 different spots. The latest is 5-year to 3-month inversion.

The yield curve recession signal is louder and louder. Inversions are persistent and growing.

Let's compare the spreads today to that of December 18, the start of the December 2018 FOMC meeting.

Yield Curve 2019-02-26 vs December and October 2018

Yield Curve Spread Analysis

Spread Changes

  • Yellow: Spreads Collapsed Since October (1 Month to 5 Years)
  • Pink: Spreads Remained Roughly the Same (7 Year)
  • Blue: Spreads Increased (30-Year and 10-Year)

Something Happening

Something is happening. What is it?

Possibilities

  1. The bond market is staring to worry about trillion dollar deficits as far as the eye can see
  2. The bond market has stagflation worries
  3. The bond bull market is over or approaching

My take is number one and possibly all three.

An in regards to recession the economy is weakening fast.

Mike "Mish" Shedlock

Comments (18)
No. 1-15
shamrock
shamrock

The recession indicator is the 2 to 10 year spread, which is still +15 basis points.

Mish
Mish

Editor

There is no foolproof indicator but 1-5 probably as meaningful as 2-10

nic9075
nic9075

Consumer confidence jumped 10 points to 131 and is within 10 points of its all time high and building permits were up 0.3%. Both are important leading indictors. Its looking like 1st half of 2014, weak 1st quarter and strong (over 3% GDP ) 2nd - 4th quarters

Greggg
Greggg

The sale of the 7 year didn't fare to well today. 7 year dropped 4 bp.

2banana
2banana

How is this different from obama's trillion dollar deficits? With a much lower GDP and less folks employed during that time period?


  1. The bond market is staring to worry about trillion dollar deficits as far as the eye can see

My take is number one and possibly all three.

Mish
Mish

Editor

Consumer Confidence

Casual_Observer
Casual_Observer

Growth will be hard to sustain with no further tax cuts or significantly rising wages.

CCR
CCR

No compelling reason for a Euro carry trade, buying the back end is smart, no inflation, front end will catch up with equities or vice versa. No big deal here until 30 year gets in the mix. Not really a deficit story story, it's a getting compensated story in a non-interest rate increasing environment. Fed telegraphed it.

Realist
Realist

Mish. Is this a formal recession ´call’ or simply more recession ´talk’?

Mish
Mish

Editor

"Mish. Is this a formal recession ´call’ or simply more recession ´talk’?"

recession within a year

Blurtman
Blurtman

Are skirts getting shorter? That and yield curve inversion are most meaningful. And how does gender dysphoria influence recession calls? What do the tea leaves say?

CCR
CCR

Another recession call? We may hit the 2Q minimum of a recession later in year, but it will be swift. Liquidity and lending are peak. Gonna take another 3-4 years before this thing really comes undone. I expect S+P 3,600 - 4,000 before this whole thing unravels. It's a bull market and economy.

Casual_Observer
Casual_Observer

Possible black swans this week and next with Cohen and Mueller. The market may sell off on political instability in the United States.

Casual_Observer
Casual_Observer

Is it possible to have barely positive GDP growth and a recession? We are about to find out. We're still in a secular bear within a cyclical bull. Powell gave the market a good signal but the market still went down.

KidHorn
KidHorn

What about investors expecting the FED to start cutting rates so they expect rates to be lower in a few years than in 3 months?