Tuesday, August 13, 2019

The Bond Market's Warning

The moves in the bond market today shed some light about the state of the economy. The yield on the 10-year Treasury note fell 9.1 basis points to 1.640 percent. That's its lowest level since October 2016.

Remember, bond yields move inversely to their prices, so when demand for them goes up, the yield that they have to offer goes down. Increasing demand for safe assets like Treasurys could be indicating a flight to safety on the part of investors.

In addition, the spread between 2-year and 10-year Treasury yields narrowed to about only 5 basis points yesterday, near its lowest level since 2007. If the 10-year yield looks falls below the 2-year note yield, an inversion is typically a recession warning.

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