{"id":1514429,"date":"2022-06-14T06:19:39","date_gmt":"2022-06-14T10:19:39","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1514429"},"modified":"2022-06-14T06:19:42","modified_gmt":"2022-06-14T10:19:42","slug":"recession-red-flag-flashes-as-bellwether-2-10-yield-curve-inverts","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/recession-red-flag-flashes-as-bellwether-2-10-yield-curve-inverts\/","title":{"rendered":"Recession Red Flag Flashes as Bellwether 2-10 Yield Curve Inverts"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">20<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Frecession-red-flag-flashes-as-bellwether-2-10-yield-curve-inverts%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1514429&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>A recessionary red flag was raised on June 13 when the <a href=\"https:\/\/www.theepochtimes.com\/t-yield-curve\">yield curve<\/a> inverted on the bellwether 2-year\/10-year U.S. Treasury spread on expectations that\u00a0the Federal Reserve might tighten monetary policy faster and further in a bid to tame soaring inflation.<\/p>\n<p>The 2-year Treasury yields climbed above 10-year borrowing costs on June 13 for the first time since a brief inversion in April, with the gap falling to as low as minus 0.02 percentage points,\u00a0Tradeweb prices showed.<\/p>\n<p>The closely watched spread between the 2-year and 10-year Treasury yield is viewed by many analysts as one of the most reliable recession red flags.<\/p>\n<p>The last time this bellwether yield curve inverted was in early April, when it quickly recovered. Prior to that, it inverted in 2019, before pandemic lockdowns the following year sent the economy into a recessionary spiral.<\/p>\n<p>After the April inversion on the 2-year\/10-year Treasury yield spread, Morgan Stanley strategists predicted it would once again invert and likely sustain that inversion for the rest of 2022. While they noted that historically such an inversion has signaled an \u201cimminent\u201d recession, they predicted that this time around it could be different.<\/p>\n<p>\u201cOverall, the yield curve has become less of a recession indicator over the last two economic cycles,\u201d Morgan Stanley Chief U.S. Economist Ellen Zentner said in a statement at the time.<\/p>\n<p>\u201cAnd when we look at factors in the economy that are typically signals of a recession, such as job growth, retail sales, real disposable income, and industrial production, we don\u2019t see an approaching recession.\u201d<\/p>\n<p>That picture hasn\u2019t shifted much since April, as the near-term outlook for U.S. economic growth \u201cremains in decent shape,\u201d according to a <a href=\"https:\/\/think.ing.com\/articles\/what-to-expect-at-the-june-federal-reserve-meeting-100622\/\">recent note<\/a> from ING analysts. But last week\u2019s unexpectedly high inflation data have boosted expectations that the Fed would move faster and further with rate hikes, raising the risk that aggressive tightening could tip the economy into a recession.<\/p>\n<p>Consumer prices in the United States grew at an over-the-year pace of 8.6 percent in May, the <a href=\"https:\/\/www.theepochtimes.com\/us-inflation-jumps-to-8-6-percent-highest-since-1981_4524285.html\">fastest<\/a>\u00a0in around 40 years and above market expectations for an 8.3 percent pace of price growth.<\/p>\n<p>The hot inflation print sent markets reeling and raised expectations that the Fed would have to hike rates faster and further in an effort to bring down the pace of price acceleration closer to its 2 percent target. Fed funds futures contracts are now seeing a 20 percent chance of a 75 basis-point move at the central bank\u2019s upcoming policy meeting. If that prediction holds, it would make it the largest single-meeting rate hike in nearly three decades.<\/p>\n<p>Still, the Fed is generally expected to hike rates by 50 basis points at its next meeting on June 14\u201315 and to follow that up with another 50 basis-point hike at its subsequent meeting on July 26\u201327.<\/p>\n<p>\u201cHowever, there is a debate as to what happens thereafter,\u201d ING analysts said in the note. \u201cSome officials want the Fed to continue with 50 [basis point] hikes to ensure inflation is brought under control, but this risks moving policy deeply into restrictive territory and heightening the chances of a recession.<\/p>\n<p>\u201cOthers argue that there is already evidence of the growth outlook weakening and inflation pressures tentatively softening, which could justify a pause in September.\u201d<\/p>\n<p>One of those who expect to see inflation picking up its pace in June from May\u2019s searing pace is\u00a0Mohamed El-Erian, chief economic adviser at Allianz.<\/p>\n<p>\u201cAmplifying the economic\/social\/political discomfort, headline is a new high for this inflation cycle,\u201d he <a href=\"https:\/\/twitter.com\/elerianm\/status\/1535240009737031682\">wrote on Twitter<\/a> on June 10. \u201cAlso, if the first 10 days of June are anything to go by, the next monthly measure would be higher.\u201d<\/p>\n<p>El-Erian also commented on June 13\u2019s yield curve inversion and pre-market moves downward in risk assets, including equities and cryptocurrencies.<\/p>\n<p>\u201cIt\u2019s not surprising that #stocks and #crypto are attracting lots of attention this morning\u201d in light of the scale of some pre-market moves on June 13, he wrote in a <a href=\"https:\/\/twitter.com\/elerianm\/status\/1536288225903398913?s=20&#038;t=cVMogsr7l1CgNFPKrBSaLQ\">tweet that day<\/a>.<\/p>\n<p>\u201cBut don\u2019t ignore #bonds where some quite notable moves up in yields also include further inversions in parts of the curve,\u201d he added.<\/p>\n<p>Following last week\u2019s inflation data,\u00a0there were inversions in the 3-year\/10-year and 5-year\/30-year portions of the Treasury curve.<\/p>\n<p>The U.S. economy contracted by 1.5 percent in the first quarter, with a\u00a0recession generally defined as two consecutive quarters of negative economic growth.<\/p>\n<p>The latest\u00a0<a href=\"https:\/\/www.atlantafed.org\/cqer\/research\/gdpnow\">Atlanta Federal Reserve Bank GDPNow<\/a> forecast estimates that\u00a0the United States\u2019 gross domestic product will grow by 0.9 percent in the second quarter.<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-tom-ozimek\"><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he&#8217;s ever heard is from Roy Peter Clark: &#8216;Hit your target&#8217; and &#8216;leave the best for last.&#8217;\n<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A recessionary red flag was raised on June 13 when the yield curve inverted on the bellwether 2-year\/10-year U.S. Treasury spread on expectations that\u00a0the Federal Reserve might tighten monetary policy<\/p>\n","protected":false},"author":1,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1514429","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1514429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1514429"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1514429\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1514429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1514429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1514429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}