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Federal Reserve Chairman Jerome Powell will begin his first of two days of testimony to lawmakers on Capitol Hill Tuesday in Washington, but while tech stocks have driven the Nasdaq to fresh record highs, and the economy looks to record its best quarterly growth rate in nearly four years, he's still likely to express at least some concern for one of the market's most-trusted prognosticators: the shaped of the so-called yield curve. Formally known as the "term structure of interest rates", but more often referred to as the "curve", the different between short and medium-term bond yields is one of the more accurate forecasters in global finance. For much of the past fifty years, an "inverted curve" -- which occurs when 2-year note yields rise past those for 10-year Treasury bonds -- has preceded nearly every U.S. economic recession.
Asian markets fell on Tuesday as mounting tensions over U.S. tariffs overshadowed data suggesting global growth was still on track. Japan's benchmark Nikkei 225 bucked the regional trend, gaining 0.4 percent to 22,692.82. The Dow Jones Industrial Average added 0.2 percent to 25,064.36 as Goldman Sachs, JPMorgan Chase, and Boeing climbed.
U.S. government bond prices slipped Monday after strong data on retail sales. The yield on the benchmark 10-year Treasury note rose for the fourth time in six trading sessions to 2.856% from 2.831% Friday. Yields jumped after the Commerce Department released a report Monday that showed retail sales rose 0.5% in June and that the increase in May had been revised upward to 1.3% from 0.8%.
The Dow Jones Industrial Average marked its third gain in a row on Monday, but the broader market finished slightly lower as the sell-off in the energy sector weighed on the market. The S&P 500 index (SPX) fell 0.1% at 2,798, with the energy sector falling 1.2% amid a rout in crude-oil futures (CLQ8) while the banking sector enjoyed a bounce as Treasury rates (TMUBMUSD10Y) climbed. Investors focused on second-quarter results, and a summit between President Donald Trump and Russian Vladimir Putin, which drew rebukes from Democrats and Republicans, for treating Putin like an ally.
Rates for home loans spiralled higher after a three-week respite, suggesting there’s still some life left in the rotation out of fixed-income assets, and reason for housing market participants to be nervous about higher borrowing costs.
The yield curve has captured Wall Street—and to a lesser extent Main Street’s—attention in recent weeks. The past nine recessions have been preceded by the inversion of the curve, where short-term Treasury rates exceed their long-term counterparts. Much of the breathless attention on the shape of the curve has centered on the tightening gap between the 2-year (BX:TMUBMUSD02Y) and 10-year Treasury yields (BX:TMUBMUSD10Y) But there are other key pairs that can signal how investors are thinking about where the economy is headed from here.
When it comes to assessing the outlook for the U.S. economy these days, the discussion usually starts with the bond market’s yield curve. The curve is signaling that the market thinks the Federal Reserve’s interest-rate increases, which are driving short-term yields higher, will not only slow inflation, but could also tip the economy into recession, causing long-term yields to go nowhere or even fall. The point is that the yield curve is not just a signal, but something that could actually weigh on the economy.
Purchases of motor vehicles contribute to a 0.5 percent uptick in retail sales last month, with data for May revised higher to show sales rising 1.3 percent. Fed Chair Jerome Powell will speak in front on Capitol Hill about the state of the economy starting on Tuesday. President Donald Trump and Russian President Vladimir Putin are meeting in Helsinki, Finland on Monday, to discuss a range of topics.
U.S. Federal Reserve Chairman Jerome Powell said in an interview this week that he believed “the economy’s in a really good place” at the moment with unemployment at the lowest point in nearly two decades and inflation finally approaching the Fed’s optimal goal of 2 percent annual increases.
America’s new fiscal stimulus package has attracted a chorus of warnings about the risks of rising federal deficits. Some concern is defensible, to the extent that fiscal stimulus now could drain policymakers’ willingness to take further action when the economy really needs it. A prime example of this can be found in the warnings from some fiscal hawks about how financial markets would be overwhelmed by the wave of government bonds needed to fund the stimulus.
U.S. government bond prices rose Friday as trade tensions lingered amid President Donald Trump’s visit to the United Kingdom. brendan smialowski/Agence France-Presse/ U.S. President Donald Trump and Britain's Prime Minister Theresa May shake hands during a joint press conference following their meeting at Chequers, the prime minister's country residence, northwest of London on the second day of Mr. Trump's U.K. visit Friday. Investors’ concerns that Mr. Trump’s visit to the U.K. could further exacerbate trade tensions have weighed on yields during the visit, some analysts said.
Short-dated Treasury yields rose after senior Federal Reserve officials highlighted the positive growth outlook and the need to hike rates at the current pace
Speculators' net bearish bets on U.S. 10-year Treasury note futures fell in the latest week from a record high the prior week, according to Commodity Futures Trading Commission data released on Friday. ...
A precipitous drop in industrial metal prices over the past month could be flashing a bullish sign for bonds.
The yield curve on U.S. Treasuries once again reached its flattest level in 11 years on Friday in low-volume trading. The spread between 2-year and 10-year Treasury notes fell to 24.46 basis points, continuing ...
JPMorgan Chase & Co.'s (JPM) CEO Jamie Dimon said he sees few signs that strong domestic economic expansion in its ninth year will be buffeted by factors including Federal Reserve monetary policy and trade-war clashes. Dimon said the prospect of rising rates and a narrowing spread between the 2-year Treasury note (TMUBMUSD02Y) and the 10-year note (TMUBMUSD10Y)--watched as a gauge of a weakening economic outlook by bond buyers and as an accurate recession indicator, when the shorter rate exceeds its longer-term counterpart--aren't creating a lot of consternation for the U.S.'s largest bank by market value. Dimon's comments come after JPMorgan (JPM) reported a profit of $8.3 billion, or $2.29 a share, topping expectations of $2.22 a share among analysts polled by Thomson Reuters.
Coming up Friday, import prices are due out at 8:30 a.m. ET, followed by consumer sentiment at 10 a.m. ET. This comes as U.S. investors will be gearing up for major bank earnings. The yield on the benchmark 10-year Treasury note was lower at around 2.839 percent at 5:25 a.m. ET, while the yield on the 30-year Treasury bond was in the red at 2.939 percent.
SEOUL, South Korea (AP) — Asian shares are mostly higher, rebounding from jitters over the U.S.-China trade disputes for a second straight day.
Treasury prices fall, nudging yields higher, on Thursday, a day after fears, sparked by a fresh round of tariffs from Trump administration, fuel buying in assets perceived as havens.
The inverted yield curve is the four horsemen of the apocalypse of the economy—investors fear them because they have often preceded recessions in the past. Strategists at Morgan Stanley on Thursday predicted the yield curve will invert by middle of 2019 although they stopped short of issuing a recession warning.
If the Federal Reserve wants to stop fearing the inverted yield curve as a recession bellwether, it should learn to stop its rate hikes before they tip above the long-term neutral rate. This also had the effect of lifting short-end Treasury yields close to their long-end counterparts, either making the yield curve very flat, or inverting it altogether.
Price pressures can ravage the value of long-dated debt, the corner of the bond market most sensitive to inflation. Rather, current yields at the long end reflect investors’ expectations for consumer prices to turn lower by the end of the year, maintaining a downward trend well into 2019. Standish Mellon’s economists forecast CPI to rise 2.4% for 2018 but cool to 2.3% in 2019.
Jul.13 -- Both China and the U.S. imposed 25 percent tariffs on $34 billion of the others’ imports on July 6, and Beijing has vowed to fight back against proposed tariffs on an additional $200 billion in Chinese goods. Oksana Aronov, fixed-income strategist at JPMorgan Asset Management, Joe Higgins, managing director at TIAA Investments, and Matt Toms, chief investment officer of fixed income at Voya Investment Management, join Bloomberg's Lisa Abramowicz to talk about the U.S.-China trade war, the Federal Reserve and the risk of a recession.