Apr 24, 2019

A reliable recession indicator is reversing course

Dion Rabouin, author of Markets
Expand chart
Data: Treasury Department; Chart: Axios Visuals

Following a yield curve inversion in March that sent tremors through financial markets, the spread between 10-year Treasury notes and 3-month T-bills has reversed and widened.

Driving the news: The inversion caused significant worry among economists and some market participants as it is one of the most reliable financial market recession indicators available.

Yes, but: While a prolonged inversion would have been worrisome, analysts say the market isn't signaling all is well with the economy just yet.

  • "I'm actually surprised we haven't seen a more meaningful selloff in bonds, given the good news that has pushed stock prices up — the delay in Brexit, the trade war and expectations for a pickup in growth in the second half of the year," Subadra Rajappa, head of U.S. rates strategy at Societe Generale, told Axios.

What to watch: Rajappa says, the rise in yields hasn't pushed the spread between 10-year and 3-month Treasuries that much higher. The difference of 15 basis points is still very tight and near levels seen in 2007.

  • "The market's much more focused on what's happening globally," she said, including growth slowdowns in Europe, Japan and China.

Bonus: The yield curve is still inverted on the short end with 1-month bills holding higher yields than maturities as long as 5 years.

Go deeper: Will the yield curve lead to recession? It really is different this time

Go deeper

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Protesters gather north of Lafayette Square near the White House during a demonstration against racism and police brutality, in Washington, D.C. on Saturday evening. Photo: Jose Luis Magana/AFP via Getty Images

Tens of thousands of demonstrators have been rallying in cities across the U.S. and around the world to protest the killing of George Floyd. Huge crowds assembled in Washington, D.C., Philadelphia and Chicago for full-day events on Saturday.

Why it matters: Twelve days of nationwide protest in the U.S. has built pressure for states to make changes on what kind of force law enforcement can use on civilians and prompted officials to review police conduct. A memorial service was held for Floyd in Raeford, North Carolina, near where he was born. Gov. Roy Cooper ordered all flags to fly at half-staff to honor him until sunset.

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Illustration: Sarah Grillo/Axios

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  3. Public health: Why the pandemic is hitting minorities harder — Coronavirus curve rises in FloridaHow racism threatens the response to the pandemic Some people are drinking and inhaling cleaning products in attempt to fight the virus.
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Despite a ban on large gatherings implemented in response to the coronavirus pandemic, protesters rally against racism in front of the American Embassy in Paris on June 6. Photo: Julien Mattia/Anadolu Agency via Getty Images

Tens of thousands of people have continued to rally in cities across the world against racism and show their support this week for U.S. demonstrators protesting the death in police custody of George Floyd.

Why it matters: The tense situation in the U.S. has brought the discussion of racism and discrimination onto the global stage at a time when most of the world is consumed by the novel coronavirus.