Yield Curve Flashing Biggest Recession Signal Yet: Shilling Thinks It Started!

-edited

Treasury yields have plunged at the mid to long end of the yield curve producing biggest recession warning yet.

On Friday, US Treasury yields plunged at the mid to long end of the curve providing the most inversions since the start of the Great Recession. This is the biggest recession warning since 2007.

Yield Curve

Click on chart to expand.

Major portions of the yield curve are inverted for nearly 15 years.

Let's take a look at what others are saying.

Core Capital Goods

That is something I pointed out as well in Dismal Durable Goods Report: Inventories Up, Shipments and New Orders Down.

Core capital goods are a measure of future business expansion. The March revision to the downside was massive, from +1.3% to +0.3%. April was -0.9%. Economists expected +0.1%. Oops.

Strong Economy Not

GDP Assessment From Markit

1.2% and falling

What's the ECB Gonna Do?

Spotlight Trade War

What About Systemic Risks?

Japanese Exports

South Korea Exports

Major Appliance Shipments

Recession Already Started?!

Mike "Mish" Shedlock

Comments (27)
No. 1-14
Casual_Observer
Casual_Observer

What is a recession ? Certainly there haven't been two consecutive quarters of negative GDP.

Six000mileyear
Six000mileyear

This inversion is a great opportunity for the Federal Reserve to unload its balance sheet. China would be wise to do the same thing.

Menaquinone
Menaquinone

There is no market for Treasuries. The Federal Reserve buys and sells to set the price. There is no market signal, US Treasury cannot pay high interest rates therefore the rates are set below what a market would dictate. The free market rate for Treasuries would be near 6%.

So who buys Treasuries? You get a gurandamnteed return of debased principle. That's good for insurance companies and retirement funds. Regulated banks are obliged to buy Treasuries or they get regulated out of business. Same goes for Goldman Sachs, et.al. These entities have an unlimited supply of free dollars to buy Treasures. They buy or the free money dries up.

That's the game.

lol
lol

Not recession,collapse happens in stages,first the complete collapse of retail,now the stunningly fast collapse of the auto sector,next freight haulers and even Walmart and dollar stores are staring down the barrel of thousand of store closures!

FromBrussels
FromBrussels

....at one point even Central banks' desperate meddling with economic cycles will become insufficient....and then what? THAT is the question , the 200 trillion dollar one !

Augustthegreat
Augustthegreat

With Trade war the U.S. Treasury is pocketing $100 billions paid by China! How can there be a recession?

RonJ
RonJ

"Shilling Thinks It Started!"

I wouldn't be surprised. Next month it will be 10 years since the last recession ended. Things are very unsettling, globally.

Ted R
Ted R

The recession really started in 2007 and it has never ended. Record low interest rates and infusing trillions of dollars into the economy papered over the problem but the problem never went away. It is still here and all we have to show for it is more debt. Record defaults are not far behind. Sad.

Maximus_Minimus
Maximus_Minimus

The FED could always hire this guy:

Mish
Mish

Editor

"What is a recession?" The NBER is the official arbiter. 2 consecutive quarters of negative GDP is not a requirement. It is a "sufficient but unnecessary" condition.

The great recession started in December of 2007 with no quarters of negative GDP.

It was announced in March before the first quarter of negative GDP officially hit the books.

So yes, we could be in one and it would not surprise me. But we may not find out for six months.

shamrock
shamrock

It really looked like the party was over in 2019Q1 too but somehow GDP came in at 3.2%.

Blurtman
Blurtman

Is your wealth going up or down? That is the real issue.

Wagner12
Wagner12

Mish, I have a good investment idea that is guaranteed to generate better profits than gold. Do you want to know what it is?

Casual_Observer
Casual_Observer

Well this doesnt feel like a recession. I found a job after a year of being unemployed. To me this time feels more like 1% growth before the next crack hit.