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Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Don't sweat the reverse yield curve and its recession warning, experts say

Don't sweat the reverse yield curve and its recession warning, experts say



Recently, US bond bonds have spooked the financial markets by demanding a higher premium on shorter government debt over long-term bonds.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In particular, the yield on 10-year government bonds fell below the increasing yield on the 3-month state tax ticket for the first time since 2006. Linked in & nbsp; yield curve inversion, & nbsp; the phenomenon often presides recession. "data-response time =" 16 "> Specifically, the yield fell on the 10th -year-old government bond under the rising yield of 3-month government bond for the first time since 2006. Doubled yield curve inversion, the phenomenon often delays the recession.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Based on a & nbsp; softens global economy, & nbsp; inversion has put Wall Street on the edge, but an increasing number of observers have a message to the markets: Relax. "data-response time =" 17 "> Based on a softening global economy, inversion set Wall Street on the edge. But an increasing number of observers have a message to the markets: Relax.

A premium on shorter rates "is an important phenomenon, and one should not ignore it, but from our perspective is more important than the shape of the curve is the level of rates," says Krishna Memani, CIO for OppenheimerFunds, which has over $ 229 billion. USD in managed assets.

Despite the Federal Reserve's betting campaign ending in December, its relatively loose policy has kept overall rates low for the best part of the last decade and continues to be "more supportive than it has been for a long time, "he added.

<p class = "canvas-atom canvas-text Mb em. Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Janet Yellen stated on Monday that the former Federal Reserve chair said that the increase in short-term rates was not a sign of a recession but could indicate an upcoming Fed cut in the Fed. "data-response time =" 20 "> Monday, former Federal Railways Chairman Janet Yellen explained that the increase in short-term rates were not indicative of a recession but could suggest a forthcoming Fed cut.

"The market is definitely flashing warning signs, and investors are buying medium-term debt over hand," said Andrew Szczurowski, portfolio manager and vice president of Eaton Vance, managing a $ 4 billion government debt.

that the Treasury has been flat for several years because of Fed's quantitative easing, "this time is different for a number of reasons," added Szczurowski. "The market gets a little for itself."

JPMorgan analyst Marko Kolanovic also recognizes that this time is different, noting that 10-year listing has been "artificially lowered with zero or negative dividends outside the US … significant QE activity and carry trades. "

<h2 class =" canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text & # 39; Scare people into wrong facts & # 39; <p class = "canvas-atom canvas-text" Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" Meanwhile, opinions differ sharply On the exact segment of the yield curve that some analysts use to measure the potential for a recession, on Tuesday, Goldman Sachs analysts argued that investors should not spend 3-month bills / 10-year dividends as a recession meter, but instead look at 2-year-old / 10-year differentiated . " data-response time = "25"> Meanwhile, opinions differ greatly from the exact segment of the yield curve that some analysts use to measure the potential of a recession. On Tuesday, Goldman Sachs analysts argued that investors should not use 3-month return / 10-year dividends as a recession meter, but should instead look at the 2-year / 10-year differentiation.

This argument was reinforced by Brian Belski, the Bank of Montreal's main investment strategist, who said the recent gap between short and long yields has created a tremendous amount of suspicions and diatribe from market researchers who "scare people into wrong facts and analyzes."

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Part of the fear was attacked on Tuesday, then The government's 2-year auction was met with strong investor demand drove prices on shorter dated paper and pushed the proceeds. "Data response time" "27"> Some anxiety was assaulted on Tuesday when the government's 2-year auction was faced with strong demand for investors, prices went up on shorter dated paper and pushed down returns.

Belski claims that the difference between 2 years and 10 years is still positive and historically has been bullish for stock investors.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "" We believe that investors should not begin to worry unless and until this yield curve inverts, "he said. Belski also quoted data showing that the annual returns on S & P 500 ( ^ GSPC ) averaged more than 12% when yields flow "data-reactid =" 29 ">" We believe investors shouldn't start worrying unless and until this yield curve inverts, "he said. Belski also quoted data showing that the annual returns on S & P 500 (^ GSPC) are more than 12% when yielded surfaces.

Although short-term investors are anxious about the economy, a reverse curve does not suggest "imminent judgment for stocks", the analyst says, emphasizing that the delay between inversion to a downturn usually involves a period of at least one year.

The mitigating factor in any downturn is the Fed. Some are betting that the central bank might be forced to lower rates once a year if the economic soft program becomes a ditch.

"The feed's goal is to minimize a decline in the economy," said OppenheimerFunds Memani.

"This concern is far more acute today than in the 90s and 2000s because they acknowledged that if the economy came into a recession, their tools are significantly more limited than before," he said. . "To a large extent, the December pivot and January surrender [on hiking rates further] was a policy driven by that fear."

<p class = "canvas-atom canvas text Mb (1.0em) Mb) – sm Mt (0.8em) – sm" type = "text" content = " Javier David is the editor of Yahoo Finance Read more: "data-response time =" 35 "> Javier David is the editor of Yahoo Finance. Read more:

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Follow Javier on Twitter: @TeflonGeek "data-reactid =" 41 "> Follow Javier on Twitter: @TeflonGeek


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