HARI KISHAN: US Treasuries about to send strong US recession signal
'At just 27 basis points now, the gap between two-year and 10-year notes is expected to shrink further to 17 basis points in a year from now, the narrowest since the early days of the financial crisis'
The moment when short-dated U.S. Treasury yields rise above longer maturities, a reliable forecaster of recessions, is only two years off at most and could happen in the next year, according to market experts polled by Reuters. At just 27 basis points now, the gap between two-year and 10-year notes is expected to shrink further to 17 basis points in a year from now, the narrowest since the early days of the financial crisis, as the U.S. Federal Reserve presses on with interest rate rises. And yet with two more rate hikes expected this year and another two or three next year, the Sept 12-20 poll of over 90 strategists showed both short- and long-term yields will rise only another 30 basis points or so in a year.
“Yields on the long end of the U.S. curve have likely peaked for 2018 when the 10-year crossed back below the 3 percent mark. The interest rate markets narrative has changed...to one more focused on the upcoming recession risks,” noted Guy LeBas, chief fixed-income stra...
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