For the second time this year, significant portions of the yield curve are inverted (shorter-term treasuries yield more than longer-term treasuries).
Treasury yields from the New York Fed, chart by Mish
These inversions are strong recession warnings although the spreads are small and the most watched 2-10 spread is still positive.
However, the 3-year, 5-year, and 7-year notes all yield more than the 30-year long bond.
Curiously, the 20-year note yield is way out of line with everything else as the following chart shows.
Yield curve to scale
Treasury yields from the New York Fed, chart by Mish
The first bar is the Effective Fed Funds rate at 0.83%. Every following bar represents three months. Values between years are extrapolated evenly.
From three years to thirty years the yield curve is flat to inverted except for the 20-year note. I am not aware of anyone with an explanation for curious behavior.
Yields at the short end of the curve rose sharply vs the longer-term notes following the consumer price report. That led to the inversions shown above.
Why did economists blow the CPI forecast so badly this month?
For discussion of the May CPI report. please see Why Did Economists Blow the CPI Forecast So Badly This Month?
Also note the national price of gas topped $5.00 today for the first time. Yesterday I reported the Average Gas Price Just a Penny Shy of $5.00 a Gallon
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.