That’s why President Trump’s trade tweets can and will move the markets significantly—in either direction. A dollar today should always be worth more than a dollar tomorrow. 'This time around, equity investors have been panicked by an inverted yield curve which in basic terms means that it's now cheaper for the government to … Photographer: Michael Nagle/Bloomberg, EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, Booking Holdings Stock Looks Fully Priced. That compared to $12.2 trillion in U.S. financial system assets. For 4 weeks receive unlimited Premium digital access to the FT's trusted, award-winning business news, MyFT – track the topics most important to you, FT Weekend – full access to the weekend content, Mobile & Tablet Apps – download to read on the go, Gift Article – share up to 10 articles a month with family, friends and colleagues, Delivery to your home or office Monday to Saturday, FT Weekend paper – a stimulating blend of news and lifestyle features, ePaper access – the digital replica of the printed newspaper, Integration with third party platforms and CRM systems, Usage based pricing and volume discounts for multiple users, Subscription management tools and usage reporting, Dedicated account and customer success teams. Back in 2017, China’s yield curve inverted -- a move that in a U.S. context would be taken by some as anticipating a downturn. In a normal yield curve, the short-term bills yield less than the long-term bonds. Historically, an inverted yield curve has predicted every recession since 1955 although a recession has usually ensued six to 24 months after the inversion has occurred. My work is also featured on Real Money, the premium portal of TheStreet.com. Today, gold is rising and EM is rising. The last time this part of the yield curve inverted was in December 2005 — two years ahead of the financial crisis and recession. I was also just looking at 1998. Vale Stock Rises Almost 3x; What’s Changed? In December 2008 the total assets of the Chinese financial system were $9.1 trillion. Then we can say it is an inverted yield curve. As of this writing, the yield curve has been inverted for nearly two months, signaling that a recession may be on the horizon. SAN FRANCISCO/NEW YORK (Reuters) - A closely watched section of the U.S. yield curve inverted on Wednesday for the first time in over 12 years, rattling investors already worried that a U.S.-China trade war might trigger a global recession and kill off a decade-long bull market on Wall Street. As Federal Reserve Vice Chairman Richard Clarida said An inverted yield curve is when the yields on bonds with a shorter duration are higher than the yields on bonds that have a longer duration. The drop on August 5 th was driven by the Trump administration declaring China a currency manipulator, and Wednesday’s drop was driven by the inversion of the yield curve – which was in turn driven by uncertainty around the trade war with China. Normally, but not always, this has been a … Some financial institution you use will have exposure to European bonds and when those bonds mature refunding them at negative rates is going to lead to losses. The dreaded inverted yield-curve has arrived. It does. As of June 30, 2018, the latest data available, Chinese financial system assets totaled $39.0 trillion dwarfing the U.S.’ total of $17.5 trillion. There seems to be a basic misunderstanding of the meaning of the inverted yield curve and its meaning for equity markets. The biggest development in the world economy over the past decade has been the astounding growth of the financial system in China. Amid a shaky marketplace, investors are eyeing the yield curve for signs of economic stability. This attracted widespread focus across the investment community and media. Today’s disappointments follow a 27-year low on gross domestic product in mid-July. China’s Inverted Yield Curve, June 28, 2017 If A Yield Curve Inverts In China, Does It Signal A Looming Recession? In the bond market, an inverted yield curve has often predicted recession in developed economies. In the bond market, an inverted yield curve has often predicted recession in developed economies. Many studies confirmed the ability of the slope of the yield curve to predict recessions. China’s economy, which was barely dented by the financial crisis that ravaged Western economies in 2008-2009, is now, ten years later, just as dependent on credit as that of the U.S. and in fact more so, by certain measures. Other yield curve measures have already inverted, including the widely-watched 3-month/10-year spread used by the Federal Reserve to gauge recession probabilities. U.S. stocks tumbled, with the Standard & Poor's 500 Index falling to a 22-month low, as a second straight selloff pushed bank shares to the lowest since 2013 and left the Nasdaq Composite Index approaching a bear market. Anything that makes Chinese companies less likely to repay their loans is a decided negative for global bond markets. SAN FRANCISCO/NEW YORK (Reuters) - A closely watched section of the U.S. yield curve inverted on Wednesday for the first time in over 12 years, rattling investors already worried that a U.S.-China trade war might trigger a global recession and kill off a decade-long bull market on Wall Street. But it moves up to 1.84% for 20 years Treasury and to 2% for 30 years. The yield curve is inverted any time a longer-duration security trades at a lower yield than a shorter-duration security. That is why shares of those tech titans—and the vast majority of stocks around the globe--are falling sharply today. After all, the yield curve inverted roughly 14 months before each of the past nine U.S. recessions. 12 Responses to “The yield curve inverted” Kgaard 22. Since President Trump tweeted about imposing new tariffs on China, global equity markets have gone into a tailspin. Others say a slowdown isn't a sure thing and that the yield curve is a red flag, not a divining rod. But the bond market looks like the world is in the middle of a global catastrophe. It's a key data point for investors who fear it means trouble ahead for the economy — and a possible end to this historic rally in the stock market. Will Earnings Meet The Market’s Expectations? This, too, happened last week when the 10-year Treasury yield fell below the 2-year Treasury yield. From Birch Gold Group. A yield inversion typically portends a recession. The Federal Reserve and other central banks have consistently referred to the fear of deflationary pressures as the biggest worry facing financial markets. 12 Responses to “The yield curve inverted” Kgaard 22. Inverted Yield Curve In short, an inverted yield curve is an interest rate environment where the long-term yield is less than the short-term yield. It also can be a precursor to a bear market in stocks, where equities fall 20% or more from highs which is the typical forecast. The China 10Y Government Bond has a 3.203% yield. 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