The bond market flashed a major recession warning sign as the yield curve inverted this week. Meanwhile, Trump whipsawed markets when he appeared to blink in the never-ending trade war with China. That made for an interesting week for gold. In this week’s Friday Gold Wrap podcast, host Mike Maharrey breaks down the events of the last few days and their impact on precious metals. He also remembers an important day in history that went mostly unnoticed in the mainstream.
The yield on the 10-year Treasury fell below the yield on the 2-year for the first time in 12 years, stoking recession fears and tanking stock markets.
Yield curve inversions have preceded all nine recessions since 1955. This was the first time the 10-year Treasury yield has dropped below the 2-year yield since June 2007 – the cusp of the Great Recession.
Bond prices have spiked and yields have fallen in the last several weeks. Investors are beginning to see a recession on the horizon and they are pouring into Treasurys believing they will provide a safe haven. In his most recent podcast, Peter said bond buyers are right about the looming recession, but they are making the wrong bet.
Peter Schiff has said a recession is a done deal. Since he made that comment, we’ve seen more and more signs of a looming economic downturn. On Friday, we got another. The yield curve inverted, historically a sign of a looming recession.
The yield on 10-year Treasurys fell below the yield on 3-year bonds for the first time since 2007 – the cusp of the Great Recession.
Last month, we reported that the global yield curve inverted, signaling the possibility of a looming recession. While narrowing to levels not seen since right before the 2008 financial crisis, the yield curve has not inverted in the US. In his most recent podcast, Peter Schiff said he doesn’t think it’s going to happen. He said we may even see a steepening yield curve in the coming months. But this is not because there’s not going to be a recession.
The economy is strong!
Or so the mainstream financial talking heads tell use every day.
Meanwhile, one of the best predictors of a looming inflation is flashing red.
The yield curve between the two and 10-year Treasuries narrowed to around 34 basis points this week. That’s the lowest level since 2007 – right before the financial crisis. Even more troubling, the global yield curve has inverted for the first time since 2007.
There are some troubling signs for the economy in the bond market. Yield curves are going flat.
On Wednesday, the yield curve from 5 to 30 year bonds flattened to as little as 29 basis points. That represents the narrowest spread since 2007. The yield curve between 2-year and 10-year Treasuries also narrowed, touching 41 basis points, also the smallest gap since before the financial crisis. Investors extending to 10 years from 7 pick up just 4.3 basis points, less than a quarter of what they got a year ago, according to Bloomberg.
So, what does this mean?