Some investors may be freaked out over the recession signal being sent by bond market rates, but if history is a guide, there is still time to capture more gains in the stock market.
On Friday, the combination of the Fed's dovish forecast after its meeting Wednesday and weak German manufacturing data combined to drive the 10-year yield sharply lower to 2.41 percent. The 3-month yield was at about 2.45 percent, but not falling as much. Rates move opposite price, so bad news on the economy results in lower yields. The curve remained inverted Monday, with the 3-month at 2.45 percent, above the 10-year yield of 2.42 percent.
"I believe there continues to be overwhelming demand for US Government debt," he wrote in a note."By far the US has the best or highest rates. This is versus many countries having zero or even negative rates, there is currently over $11 Trillion dollars of outstanding sovereign debt with negative yields! Regardless of economic perceptions be they good or in the case of Friday bad, the value inherent in US Government debt is creating exceptional demand.
"Just looking at it, I don't think that by itself it's a major short-term concern. You have to see how things play out. There were some exceptions where you didn't see a recession, but typically you saw one in the next year or two," he said. Analysts also said they would watch to see if the move is sustained or just temporary."If we start to see it steepen again right away, it could get ignored," said Hickey."If we see it get further and further inverted, that would be something that would obviously be a cause for concern. We have a week left in the quarter and if we see earnings warnings from companies start to pick up that would be something to worry about.
Delaying the inevitable.
Trying a hard sell here ? Ain’t we ?
FoxBusiness MadMoneyOnCNBC even banks do well in a flat yield curve and Janet Yellen says we have a flat yield curve
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