A closely watched forecast for a recession in the bond market is still shining red, raising fresh concerns that the US economy is on a downward trend this year as a result of the Federal Reserve’s fight against inflation.
The spread between 2-year and 10-year Treasury yields reversed for the first time since April this week, on fears that the Federal Reserve’s aggressive approach to tackling the highest inflation in four decades could lead to a steady slowdown in growth. Can The trend – which is rare – has historically been an accurate predictor of recession.
During Tuesday morning’s trading, yields on the two-year Treasury note rose 3.431 percent, rising to about 3.277 percent from 30-year bonds. According to Mark Hackett, head of investment research across the country, the move reflects “Fed policy errors and fears of an impending recession.”
Yield curves are seen as a good predictor of recession as it suggests that investors are confident – interest rates on long-term bonds are lower than rates on short-term bonds – economic growth. Is slowing down Before every recession in the last 60 years, there was an inverted production curve, he said research From the Federal Reserve Bank of San Francisco.
Concerns are mounting on Wall Street that US Federal Reserve interest rates will rise at the fastest pace in two decades, following a Labor Department report released last week that included consumer price indexes in May. I had an increase of 8.6%. A year earlier, faster than expected. This indicates the fastest pace of inflation since December 1981.
The disappointing inflation report has left investors uneasy and prompted traders to reconsider their expectations for raising the Fed this year. Wall Street banks Barclays and Jefferies are now forecasting a 75 basis point increase at the end of the Fed’s policy-setting meeting on Wednesday – for the first time since 1994. According to the FedWatch tool of the CME Group, which tracks trading, the majority of traders – about 96% – have also increased their rates this month.
“The US Federal Reserve now has a good reason to surprise markets by walking more aggressively than expected in June,” Barclays strategists wrote in a note on Friday. “We realize this is a close call and it could be in June or July. But we are changing our forecast for June 15 to add 75 basis points.