FAST FIVE: Recession Countdown Begins: Treasury 2s10s Yield Curve Inverts For First Time In 12 Years; 30Y Yield Drops To All Time Low
and that has just inverted for the first time since May 2007.
source: Bloomberg The strongest recessionary signal yet, and equity markets appear to be waking up what this all means.
Second, given the increased globalization of the financial markets the appeal and demand of long-dated US Treasury securities is often based on the yields available in other major economies.
If the imposition of new tariffs and the uncertainty over what may follow triggers a de-risking and rush to exit, sparking a sustained 25% to 30% correction in the equity market that by itself could trigger a recession as it would deal a substantial blow to consumer liquidity and wealth, and an abrupt and sharp decline in spending and confidence.
That is not a forecast or a prediction but merely an observation that all recessions have been caused by some form of a demand shock, and the inverted yield curve merely highlighted the vulnerability of the economy to a potential bad outcome.