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Bond Yields Dive After a Poor ISM Report Showing a Plunge in New Orders

Evidence of recession keeps piling up. Powell needs to reassess his soft landing thesis.
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Yield curve data from the New York Fed and Investing.com, chart by Mish

Yield curve data from the New York Fed and Investing.com, chart by Mish

The 2-month yield and the Effective Fed Funds rates are from yesterday. The 20-year yield is my estimate. My starting point is yesterday's number and I assume a similar reaction as the 30-year long bond. 

Today's Bond Market Change 

  • 2-Year: -0.11
  • 3-Year: -0.13
  • 5-Year: -0.13
  • 7-year: -0.12
  • 10-year: -0.10
  • 30-year: -0.13

The last time I wrote about the yield curve was on June 12 in Yield Curve Inversions Return, Signaling Another Recession Warning

Here are the yields from June 14, when the 10-year yield peaked.

Yields on June 14

  • 1-Year: 3.15
  • 2-Year: 3.45
  • 3-Year: 3.60
  • 5-Year: 3.61
  • 7-year: 3.60
  • 10-year: 3.49
  • 30-year: 3.45

Yields on July 1

  • 1-Year: 2.70
  • 2-Year: 2.81
  • 3-Year: 2.86
  • 5-Year: 2.89
  • 7-year: 2.93
  • 10-year: 2.89
  • 30-year: 3.10

Change Since June 14

  • 1-Year: -0.45
  • 2-Year: -0.64
  • 3-Year: -0.74
  • 5-Year: -0.72
  • 7-year: -0.67
  • 10-year: -0.60
  • 30-year: -0.35

Multiple times in and out of inversions followed by a sudden sustained decline in yields is a strong signal that recession has started. 

ISM

What triggered today's reaction was a poor ISM report in which new orders plunged 5.9 points from 55.1 to 49.2 to contraction.

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Employment as Well

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Forget about a soft landing. Recession has already started. The questions are how deep and how long? 

I will address those questions in another post. 

This post originated at MishTalk.Com.

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