Which is it - growth or gloom? With 10-year U.S. bond yields below 3-month T-bill rates for the first time in more than a decade, recession fears are swirling. After all, an inverted yield curve, when longer-dated yields drop below shorter maturities, have proved to be fairly reliable predictors of U.S. recessions in the past. As a result some investors are busy putting cash behind bets the Fed is gearing up for rate cuts.
But policymakers around the world have already taken heed. The ECB has hinted at further rate cut delays and at tiering interest rates to help banks; other central banks, from New Zealand to Canada, are hinting at rate cuts ahead.Graphic: U.S. yield curve inverts for first time since 2007 - https://tmsnrt.rs/2UNVc1PNo. No. No. No.
Options markets aren't optimistic. The price investors are willing to pay for one-month sterling protection - insurance against sterling falls - is at the highest since the 2016 referendum vote.U.S. factory job growth was its weakest in February since the summer of 2017 but still managed to extend the streak of monthly gains to 19, the longest in nearly a quarter century.
In the meantime though, tariffs on Chinese goods worth US$250 billion are in play and that is hurting - China as well as its Asian neighbors who are linked to it through complex supply chains. March Purchasing Managers Indexes are expected to show a further deterioration in sentiment across the region and another source of pressure is the worry of a recession in the United States.