The sharp fall witnessed in the U.S. T-bond yields this week caused a yield curve inversion for the first time since the financial crisis presented by the yield on the 5-year note dropping below the yield on the 2-year note.
Commenting on this development, Jeffrey Gundlach, chief executive officer of DoubleLine Capital, said that the yield curve inversion on short end maturities was a signal that the economy was poised to weaken.
“If the bond market trusts the Fed’s latest words about ‘data dependency,’ then the totally flat Treasury Note curve is predicting softer future growth (and) will stay the Fed’s hand. If that is indeed to be the case, the recent strong equity recovery is at risk from fundamental economic deterioration, a message that is sounding from the junk bond market, whose rebound has been far less impressive," Gundlach added.
As of writing, the 10-year bond yield was down 2.65% at 2.912%, the 5-year bond yield was losing 1.83% at 2.787%, and the 2-year bond yield was dropping 1% at 2.805%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.