Yield Curve Inverts in 28 Places: Recession Warning Resumes

-edited

After a brief respite, the yield curve is again flashing a bright recession signal. The curve is inverted in 28 places.

Automatic Pilot Spotlight

Let's flashback to Fed Chair Jerome Powell's statements following the December 19 FOMC meeting.

Powell was asked about the Fed's balance sheet and quantitative tightening.

We thought carefully about how to normalize policy and came to the view that we would effectively have the balance sheet run off on automatic pilot and use monetary policy, rate policy to adjust to incoming data. I think that has been a good decision. I think that the runoff of the balance sheet has been smooth and has served its purpose and I don't see us changing that. And I do think that we will continue to use monetary policy, which is to say rate policy as the active tool of monetary policy.

I commented Shut Up! Shut Up!

Automatic Pilot

Automatic pilot, what a hoot.

Today, I repeat, "What a Hoot".

The 7-year, 5-year, and 3-year notes all all about 50 basis points lower. And the yield curve is inverted in 28 places.

Yield Curve to Scale

Synopsis

  • The yield curve is inverted from the 1-year note through 13 years.
  • The yield curve is inverted from the 3-month T-bill through the 10-year note.
  • The yield curve is inverted in 28 places.

Those who thought the recession signal was over, thought wrong.

Mike "Mish" Shedlock

Comments
No. 1-9
Matt3
Matt3

This is big news. How many recession signals have we had in the last 5 years? Seems like every year has a recession signal but we have many less recessions than the signals would indicate. I'm sure one of the signals will eventually be correct - confirming the importance of the signals and the genius of those highlighted them.

Bad news sells but the truth is that we just don't know.

Realist
Realist

You can count me as ´one of those who thought the recession signal was over’. I am still not a big believer in inversion as a reliable indicator. However, I have consistently said that there would be no recession as long as there wasn’t a black swan event or some shock like Trump expanding his trade war. Since it appeared to me that Trump would probably expand his trade war in the last few months I have been lightening up on my investments and raising cash to buy on a pullback. I started nibbling today at some bargains, but I’m still expecting more downside for another week or two. I then expect Trump to cave in and we should see a good rally off the lows.

Blurtman
Blurtman

Who cares? Felicity Huffman is going to jail!!!!

magoomba
magoomba

With the real economy mired for decades in feudalistic inflationary depression how can anybody even tell if a recession starting?

CCR
CCR

Here we go with recession flim flam. Bond buying does not portend recession. If a recession happens it will be entirely short lived in iteration 1. Iteration 2 in 2022-2023 will be the one that sneaks up . Inflation by any means, even tariffs, good for stocks, good for margins short term....just not good for market character in the long term. S+P will correct under this selling duress, maybe even 2400 / 2500. Bond buyers are not what they used to be. Institutional schmucks with a client need....not near term clarvoyance.