The above chart shows the last six recessions. I do not believe any points of the curve inverted but I only show short-term rates and the 10-year rate. I believe portions of the yield curve did invert in the 1989-1990 recession when the Japanese stock market bubble burst.

On My Radar

I received an "On My Radar" email from Steve Blumenthal at CMG Wealth on the Risks Inherent at the End of a Long-Term Debt Supercycle. Here's the pertinent clip.

“One last thing – as for this debate about the yield curve needing to invert to warrant a recession call, the reality is that at the ultra-low levels of rates, bloated central bank balance sheets that are in the process of gradually unwinding, and in the face of record volumes of debt outstanding, you do not need to see curve inversion. Japan is the template – each of its last four recessions occurred with the yield curve still positively sloped!

The U.S. bubble is not in real estate credit this cycle, but the chart of corporate debt to GDP today looks a whole lot like the chart of mortgage debt/GDP just over a decade ago. There will be a price to be paid, in a tightening Fed policy environment, for creating a bubble condition such that half of the investment-grade corporate bond market today is one notch away from being downgraded to junk.

According to Moody’s, leveraged loan covenants are now the weakest they have ever been. Expect to hear the terms “fallen angels” and “destruction of value” in the next year or two (perhaps why having some dry powder on hand right now is going to pay off big time as the credit cycle shifts into reverse).”

The source of that quote is actually David Rosenberg, “Breakfast with Dave” (July 26, 2018).

RECOMMENDED ARTICLES

Japan Nearing Recession Again

Image placeholder title

In the first quarter of 2018, Japanese GDP was -0.2%.

Don't think that cannot happen here.

Mike "Mish" Shedlock

Why the Yield Curve Inverts in One Simple Picture

The yield curve inverts when the Fed keeps hiking in the face of a slowdown.

Yield Curve Inverts in 28 Places: Recession Warning Resumes

After a brief respite, the yield curve is again flashing a bright recession signal. The curve is inverted in 28 places.

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.

Canadian and Australian Yield Curves Invert- Clear Recession Signals

Those looking for clear recession signals in Canada and Australia have them. Portions of the Canadian and Australian yield curves are now inverted. Canada has been in a state of inversion for at least four weeks.

Yield Curve is Inverted for Nearly 25 Years

Using the Fed Funds Rate as the baseline overnight duration, the yield curve is inverted for nearly 25 years.

China's Yield Curve Inverts: Will the US Follow?

China's macro picture tumbled to its weakest since August 2016. Portions of the yuan yield curve inverted again as China attempts to rein in property bubbles and state-owned enterprise (SOE) excesses. The US yield curve hasn't inverted yet. What's in the cards?

Yield Curve Will Invert From the Inside Out

How does the yield curve invert? Jim Bianco at Bianco Research says "Inside Out"

Yield Curve Inverted Out to Seven Years

Portions of the yield curve are once again inverted all the way out to 7 years.

What Spot in the Yield Curve is Likely to Invert First?

The yield curve has flattened considerably over the last year. Will it invert? Where? The following chart explains.