On the 14th local time, the yield on the 10-year US Treasury bond was lower than the 2-year Treasury yield for the first time since 2007 before the financial crisis. Reuters said on the 15th that “the US Treasury yields are upside down” is considered to be a classic indicator of the economic recession, which caused the Dow to suffer the biggest decline during the year. In the past 50 years, the reversal of the US Treasury yield curve often indicates the advent of the recession.
10-year Treasury yields are lower than the biennium
The US CNBC website reported on the 15th that in the Asian trading session on Thursday, the 30-year US Treasury yield fell to a record low of 1.9069%, breaking the 2% level for the first time, lower than the July 2016 intraday low. On the 14th, the US 2-year and 10-year government bond yield curves fell for the first time in the past 14 years, and the latter’s yield fell to a three-year low of 1.57%.
The government bond market issued new warnings about the upcoming recession risk, highlighting Wall Street’s concerns about the prospect of economic expansion for 10 years. On the 14th, driven by the sharp decline in economically sensitive industries such as banks and manufacturing, the US Dow Jones Industrial Average fell 800.49 points, or 3.05%, the biggest drop this year. The Nasdaq and Standard & Poor’s index also fell 3.02% and 2.93% across the board. It almost erased all the gains from the previous day when the US stocks harvested good news from the Sino-US trade.
The US “Washington Post” said on the 15th that former Federal Reserve Chairman Yellen said in a commentary on the reversal of the main yield curve of US Treasury bonds, “this may be a bad signal.” She believes that this rate of return curve is not necessarily a sign of recession, the US economy has enough strength to avoid recession, but “the possibility of falling into recession has risen significantly, and higher than I think.”
“Warnings for the Trump trade war”
After the US bond yield curve was upside down, US President Trump criticized the Fed for three consecutive tweets on the 14th, pointing to Fed Chairman Powell, who believed that he should be responsible for the current situation. Trump said “our problem lies with the Fed” and “stupid and incompetent Fed Chairman Powell” and accused the Fed of “increasing interest rates too much too fast” and now “reducing interest rates too slowly.”
The Washington Post said that Trump expressed “clear concerns” about the economy. The report analyzes that the current biggest threat to Trump’s re-election is the US economy, which is showing signs of growing instability.
The report said that two weeks ago Trump announced that it would impose a 10% tariff on China’s $300 billion worth of US exports from September, but this week announced another delay in tax increases and the exclusion of some goods from the tax increase list. . This is seen as a sign of weakness in the US trade war with China.
The US Trade Representative Office announced that it will impose a 10% tariff on imports of about US$300 billion from China. The relevant person in charge of the Customs Tariff Commission of the State Council of China said on the 15th that the US side has seriously violated the consensus of the heads of state of Argentina and the meeting between Osaka and the United States. Consensus deviates from the correct track of consultation to resolve differences. China will have to take the necessary countermeasures.
On the impact of the inversion of US Treasury yields, CITIC Securities research team said on the 15th that from the 1980s to the present, there have been five significant interest rate inversions in US history, which appeared in 1982, 1989, 2000, 2006. In the year and 2019, three of them subsequently fell into recession, in 1990, 2001 and 2008.
The German media believes that the signs of a US recession at this time are not good news for Trump. In the past two and a half years, the economic development of the United States has been good, coupled with low unemployment, Trump is considered one of his greatest success. However, before the US presidential election, the US economy began to cool down.
“Warnings about Trump’s trade war,” German News TV said on the 15th that the signs of economic recession are a big blow to Trump – the original US economy did not benefit from the trade war, but instead is pulling itself into trouble. . In the future, the United States as a big technology power, the super status of the dollar will be hit. With the recession of the US economy, the balance of Sino-US negotiations may be tilted toward China, and there are few cards in the United States that can be played. Now, the United States should abandon the trade war, and the world should strengthen cooperation and jointly fight the economic recession.
Asia-Europe multinational bond shock
At a time when the US debt is in crisis, many bond markets around the world are also experiencing turmoil. The UK and Canada also experienced the first bond yields after the financial crisis, and Asian economies’ bonds were also under pressure. More and more “upside down” seems to indicate that the alarm for the recession has sounded.
The US CNBC website said on the 14th that the 10-year government bond in major Asian markets suffered a sharp decline, and investors worried about the economic recession passed to the capital market. The 10-year government bond yields in Japan, South Korea, Australia and Singapore all declined significantly.
In Europe, German 10-year bond yields hit a new low of -0.623%, and the yields of government bonds in Denmark, Belgium, the Netherlands and other countries turned negative. The UK economy has shrunk for the first time since 2012. According to data released by the National Bureau of Statistics on August 9, the UK’s domestic output fell 0.2% in the second quarter of this year, which was lower than economists’ expectations and 0.5% lower than the first quarter of this year.