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Interesting Bond Market Action Today: Long Yields Down, Short Up

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18 comments on Interesting Bond Market Action Today: Long Yields Down, Short Up

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The 30-year bond yield is down 5 basis points and the 2-year yield is up nearly 5 basis points.  

We have not seen that behavior for a while.

This is recessionary-looking behavior but one day does not a market make. We are also nowhere close to inversions. 

But recessions can happen without inversions, and who knows what the curve will look like just as the Fed believes it will hike next year. 

By the time the Fed gets to that point, I suggest recession may be at hand with no way to cut. 

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Mike Shedlock

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Scooot
Scooot
2 years ago
Short rates wouldn’t normally rise in a recession. 
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Mish
Mish
2 years ago
Reply to  Scooot
Nope BUT they rise ahead of one with long rates falling
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Scooot
Scooot
2 years ago
Reply to  Mish
I disagree, you’d normally expect CB’s to consider cutting rates as economies begin to slow ahead of recessions. However, the yield curve might be tilting around a point further out this time because  there are also inflationary/stagflationary concerns. 
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Tony Bennett
Tony Bennett
2 years ago
Reply to  Scooot
Mish is correct.
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Scooot
Scooot
2 years ago
Reply to  Tony Bennett
Well, it depends how far ahead of the recession you look, it looks to me as if rates generally start rising on a more permanent trend after recessions end. If you look at the last three recessions on the Fed’s chart, they peaked in April 89 at 9.84 and were at 8.15 in August 90 at the start of the recession. From August 2000 to April 01, they peaked at 6.5 then down to 4.8 at the start, and in the last on there, March 07 to Dec 07 the rates are 5.26 to 4.24. In the mid 70’s and early 80’s it does indeed look as if they were late cutting.
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Tony Bennett
Tony Bennett
2 years ago
Reply to  Scooot
The thing you need to remember – on that chart the recession bars are based on historical data.  Initial / early revisions are often wrong by a lot.  No one ever knows for sure in real time when entering recession.  NBER is US official recession caller.  In GFC the NBER announced in December 2008 that country had entered in recession … in December 2007 … a whole year earlier.  Summer of 2008 many bullz still thought everything OK.
I’m sorry, anyone saying Mish is wrong here is splitting hairs … or worse.
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caradoc-again
caradoc-again
2 years ago
Recession just round the corner and it wlll be a doozey.
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anoop
anoop
2 years ago
why is that interesting?
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Christoball
Christoball
2 years ago
Recessions are times when people begin to live within their means. Expansions are times when people live above their means through credit.
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amigator
amigator
2 years ago
“One day does not a market make”, but it has to start somewhere. 
Thanks for the heads-up.
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Tony Bennett
Tony Bennett
2 years ago
“But recessions can happen without inversions”
…
Yes.  And most data faces multiple revisions.  Economists are notorious for “missing” at turning points.  GFC recession ultimately deemed by NBER to have started December 2007.  BEA on Q 1 GDP (initial estimate in April 2008)? … +0.6%.  The FINAL revision … years later … -2.3%.
Kudlow was about the last bull I recall to throw in towel … ~ Labor Day 2008.
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Eddie_T
Eddie_T
2 years ago
Bears watching, for sure. I think inversions are almost always a sign of bad news coming soon.
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KidHorn
KidHorn
2 years ago
You can’t look at the yield curve and predict recessions. Maybe you could 20+ years ago, but now the FED distorts everything.
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Tony Bennett
Tony Bennett
2 years ago
Reply to  KidHorn
To a degree.  But in the end Mr Bond Market bigger than Federal Reserve.
Anyways, not just Federal Reserve providing distortion.  Treasury decides  what maturity to issue … and currently are pushing more debt out on long end of curve.  Latest numbers are for June.  June 2020 average maturity all debt 55 months.  June 2021 average maturity all debt 62 months.
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KidHorn
KidHorn
2 years ago
Reply to  Tony Bennett
Much more than to a degree. They control every point on the curve. Maybe not day to day minutia, but if they see something they don’t like, they can quickly change it.
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Tony Bennett
Tony Bennett
2 years ago
Reply to  KidHorn
Well, I disagree.  
For years Federal Reserve reiterated not going NIRP.  
I fully expect the yield curve out to 10 yr will flirt with if not actually go negative.  Mainly due to offshore (looking at you, China) $$s looking for safe harbor.
We’ll see.
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Casual_Observer2020
Casual_Observer2020
2 years ago
So this ties into my anecdotal evidence that job openings were never as high as reported. They may only be going higher not because of new openings but because people are quitting.
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KidHorn
KidHorn
2 years ago
Reply to  Casual_Observer2020
They’re quitting because of covid mandates.
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