Welcome Back! 5-Year Treasury Yield Sinks Below 2%

Mish

Hello one-handle: In response to Trump's misguided Tariff tactics on Mexico, bond yields continue to crash.

Welcome Back!

Bond yields continue to crash in response to seriously misguided US foreign policy.

Thursday evening, the 5-Year treasury yield slipped below 2% for the first time since November of 2017.

What Happened?

The short answer is Trump levied Tariffs on Mexico, demanding the country put an end to illegal immigration flowing into the US. Economic risks rose, thus bond yields fell.

Realistically, a recession was baked in the cake anyway. Trump merely sped up the process.

For discussion of Trump's action please see "Hello Recession".

Mike "Mish" Shedlock

Comments (16)
No. 1-6
Menaquinone
Menaquinone

We can safely say the flight of capital is out of Mexico and into USA. The same goes for manufacturing. Surprise! Mexicans are paying for the wall. I like what happens when Mexicans, Chinese, Germans, and North Koreans don't play ball with Trump. They go from peaches and cream to third world Chicago in one fell swoop.

Casual_Observer
Casual_Observer

We are headed to zero again. Maybe sooner than we know.

Matt3
Matt3

Mish. Can you list the last 5 years of your recession predictions? I think you have multiple recession predictions in each year. As we will surely have a recession at some point, recession predictions seem like an easy way to later claim "to have seen it coming".

KidHorn
KidHorn

The 6 month is higher than the 10 year. So short term savings rates are > long term loan rates. Seems like bank earnings, outside of credit cards, may be challenging.

Mish
Mish

Editor

I called for two recessions that never happened One of them may have but the NBER did not see it that way. One I foolishly followed ECRI based on what now appears to be coincident nonsense.
Discussing recessions and calling them are not the same thing, but yes I called for two that did not happen. I even pointed out my errors previously. This is a third call. The economy muddled through better than I thought. And finally, I will not be bragging when this one happens.

AWC
AWC

Humm,,,what if ?,,,

The administration saw the Feds hiking, to cool speculation in asset markets, as a threat to it's re-election bid in 2020, so instead, it decided to impose tariffs (A form of indirect value added tax on consumption) to slow economic activity.

This would force the Fed to resist further rate hikes, thus transferring economic growth influence to the administration (rather than allowing the Fed to seize control of economic growth via tightening, making the administration irrelevant.)

The tariffs could continue to slow activity, rates falling the entire time, maybe even the full 100 basis points the administration is advocating, until the campaign is in full swing, and the election is near.

At that time, a dropping of all tariffs could be announced as a big "win," goosing the markets, and assuring a successful re-election.

Which might create another question,,,, what might the Fed do to counter such a strategy, in order to put itself back in the driver seat?

Prolly just another conspiracy theory, but......


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