Yield Curve Recession Watch: 7-Year Treasury Yield Inverts With 1-Year

The yield curve is inverted in six places. Notably, the 1-year T-Bill yield inverts with all durations through 7 years.

Strong Recession Signal

Today, the 1-year T-Bill rate inverted with higher duration notes up to and including the 7-year note. I count 6 inversions, 4 of them with the 1-Yr bill.

A 1-year T-Bill inversion with the 10-year note is only 8.5 basis points away.

This is the strongest recession signal yet.

Debt Watch

Despite the flattening and now inverting yield curve, note that the spread between the 10-year and 7-year bond actually rose over the course of 2018.

The spread between the 30-year long bond and the 10-year note is nearly what it was a year ago.

I believe this is a strong bond market signal that the end of the bond bull market approaches. It's possible it's already over. But I do expect one more strong push lower in yields as recession hits in 2019.

We have enormous deficits as far as the eye can see from a starting point of $21 trillion in debt.

Got Gold?

Mike "Mish" Shedlock

Comments (6)
No. 1-5
Axiom7
Axiom7

I believe the number is over $22trillion now.

jivefive99
jivefive99

The Federal government, the smaller governments and the corporations cannot under any circumstances allow the debt service (interest rates) to increase. Lots of alpha-types who run these organizations would consider it a personal failure to default. It will not be allowed. We will declare war on interest rates first before we allow them to rise much further -- inflation be damned.

gregggg
gregggg

Realist
Realist

Sadly, it’s not just the $22 trillion federal debt. The US govt also owes almost $3 trillion to Social Security which isn’t included in the debt figures.

Marc737
Marc737

Hello Mish, Don't you think the Fed will be buying bonds again to bring rates down. (I do)? Don't you think 10 yr rates will be approaching zero like in Japan and Germany (I do)?

Thanks for replying. Marc