Those “inverted” Treasury-bond yield curves are back in the headlines again, and investors are more worried than ever about the R-word: recession.
“Tuesday’s market action provided an unambiguous signal that investors are expecting a recession,” Axios reported on Wednesday, adding that the “Treasury yield curve completely inverted” with short-term bills paying higher interest rates than 30-year bonds.
What’s behind all this? President Trump’s trade war with China.
Despite Trump’s often-expressed optimism about the U.S. economy, many on Wall Street are growing more concerned that his tariffs, and China’s determination to fight back, mean a long conflict, damaging to both sides.
As a result, Axios says, those investors “are buying up safe-haven U.S. government debt to take cover.”
In other words, they’re buying more longer-term bonds, which pushes prices up, and returns down.
Yields on the benchmark 10-year Treasury note are now just above their lowest levels in history, while for the first time since the depths of the last recession in 2009, “the S&P 500’s dividend offered a higher yield than 30-year Treasury bonds,” Axios says.