US bond-market selloff continues as resilient economy prompts investors to anticipate elevated interest rates even after the Federal Reserve finishes its hikes, leading to a 16-year high in 10-year yields and increased inflation expectations.
Despite recent positive economic indicators, experts warn that a recession may still be on the horizon due to the lagged effects of interest rate hikes, increased debt, and a slowing manufacturing sector, cautioning investors not to become complacent.
The Chinese bond market is experiencing a significant shift due to concerns over China's economic growth prospects, including a bursting property bubble and lack of government stimulus, leading to potential capital flight and pressure on the yuan, which could result in increased selling of US Treasuries by Chinese banks and a rethink of global growth expectations.
Despite the inverted yield curve, which traditionally predicts an economic downturn, the US economy has remained strong due to factors such as fiscal and monetary stimulus efforts and a lag time before interest rate hikes impact the economy, but some bond market experts believe the yield curve will eventually prove to be a good indicator for the market and the economy.
US equity markets were relatively stagnant last week, with major indexes trading up and down around their 200-day moving averages, indicating a lack of direction and potential resistance, while Treasury markets appeared to stabilize despite an inverted yield curve, suggesting a potential recession on the horizon. Fed Chair Jerome Powell's hawkish speech on Friday emphasized the need for caution and the possibility of higher interest rates, while Nvidia's strong earnings highlighted the company's dominance in the artificial intelligence sector.
Investors should consider moving into longer-dated bonds as historical data shows that the broader U.S. bond market typically outperforms short-term Treasurys at the end of Federal Reserve rate hiking cycles, according to Saira Malik, chief investment officer at Nuveen.
US Treasury bonds are on track for their longest stretch of losses ever, facing three consecutive annual declines, which hasn't happened since 1787, due to rising interest rates and a decline in bond prices.
Top economist David Rosenberg predicts that the US will experience a recession within the next six months due to the aggressive interest rate hikes by the Federal Reserve and the erosion of credit quality in credit card debt.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
There are indications that a severe economic contraction may be approaching in the US, with a significant decline in home sales and rising interest rates, similar to the 2008 financial crisis, according to Bloomberg analyst Mike McGlone.
The bond market's 10-year and 3-month yield curve has been inverted for a record-breaking 212 straight trading days, indicating the possibility of an upcoming economic recession despite economists' lowered expectations; however, the inversion's uniqueness, driven by the Federal Reserve's focus on combating inflation during a period of strong economic growth, leaves open the question of whether this inversion will fail to predict a recession, particularly if the Fed is able to declare victory on inflation and cut interest rates to above the neutral rate of around 2.5%.
The Federal Reserve Bank of New York's recession probability tool, which examines the difference in yield between the 10-year U.S. Treasury bond and three-month bill, suggests a 60.83% probability of a U.S. recession through August 2024, indicating that stocks may move lower in the coming months and quarters. However, historical data shows that U.S. recessions are typically short-lived, and long-term investors have little to worry about.
Entrepreneur Jaspreet Singh warns that signs of a potential recession in America include labor shortages, inflation-driven spending, and high interest rates, with economists predicting that the country may start feeling the effects of a recession by the second quarter of 2024. Singh advises Americans to educate themselves about saving money and investing to prepare for the possible downturn.
The Federal Reserve has paused raising interest rates and projects that the US will not experience a recession until at least 2027, citing improvement in the economy and a "very smooth landing," though there are still potential risks such as surging oil prices, an auto worker strike, and the threat of a government shutdown.
The bond market's recession indicator, known as the inverted yield curve, is likely correct in signaling a coming recession and suggests that the Federal Reserve made a major mistake in its inflation policy, according to economist Campbell Harvey. The yield curve, which has correctly predicted every recession since 1968, typically lags behind the start of a recession, with the average wait time being 13 months. Harvey believes that a recession is imminent due to the Fed's tight monetary policy and warns against further interest rate hikes.
The forecasted U.S. recession in 2024 is expected to be shorter and less severe than previous recessions, with the economy's interest-rate sensitivity much lower due to reduced leverage and elevated savings from the postpandemic environment, leading investors to consider positioning for investment opportunities that will drive markets into 2024.
The US economy has triggered the fourth and final signal for a potential recession, and historical data suggests that recessions will become more frequent in the future due to government interventions and other factors such as inflation, tightening monetary policy, oil price spikes, and tight government budgets.
The U.S. stock market has experienced a decline due to conflicting economic news and a surge in bond yields, which may be driven by factors other than data, such as fiscal deficits and central bank policies.
Deutsche Bank's economists are still predicting a US recession despite the ongoing resilience of the economy, pointing to rapidly rising interest rates, surging inflation, an inverted yield curve, and oil price shocks as the four key triggers that historically have caused recessions and are currently happening.
The recent surge in bond yields, with 10-year Treasury yields hitting levels not seen in over 15 years, is impacting the stock market as investors shift their focus to safer bond investments, which offer higher yields and less volatility than stocks.
Fidelity Investments' global macro director believes that a recession could lead to a significant rally for Bitcoin, with the potential for prices to reach $96,210 by the end of 2025 if interest rates decline. He also suggests that Bitcoin's correlation with equities has decreased, making it a potential source of uncorrelated returns in the next market cycle.
The U.S. bond market is signaling the end of the era of low interest rates and inflation that began with the 2008 financial crisis, as investors believe that the U.S. economy is now in a "high-pressure equilibrium" characterized by higher inflation, low unemployment, and positive growth. The shift in rate outlook has significant implications for policy, business, and individuals.
Investors and experts differ on the timing, but many believe a recession is inevitable in the near future due to falling consumer confidence and a slowing economy, prompting discussions about the Federal Reserve's interest rate moves.
The recent surge in U.S. government bond yields, with prices falling, has raised concerns about the stability of the bond market and the economy, potentially leading to more bank failures and market upheaval.
The world's biggest bond markets are experiencing a selloff as higher interest rates become the new norm, which has implications on government borrowing costs, global financial markets, and emerging economies.
The stock market's resilience in the face of rising bond yields could be a warning sign, as it mirrors the conditions seen before the 1987 stock crash and any sign of recession now could lead to a major sell-off, according to Societe Generale strategist Albert Edwards.
The Federal Reserve's shift towards higher interest rates is causing significant turmoil in financial markets, with major averages falling and Treasury yields reaching their highest levels in 16 years, resulting in increased costs of capital for companies and potential challenges for banks and consumers.
Banks are preparing for a potential recession as bond yields rise to their highest levels since before the 2007-2008 financial crisis, leading to potential yearly losses for bank stocks despite their high reserves.
Falling bond prices in the US, resulting in higher Treasury yields, suggest that a recession might be approaching, according to investor Jeff Gundlach, who is closely watching the upcoming jobs report for further signs.
Falling U.S. bond prices and the rapid normalization of the Treasury yield curve are signaling that a recession may be imminent, according to DoubleLine Capital founder Jeff Gundlach, who will be closely monitoring the September jobs report for further clues.
The spread between the two-year and 10-year Treasury bonds is narrowing, indicating a potential recession on the horizon.
Violent moves in the bond market have sparked fears of a recession and raised concerns about housing, banks, and the fiscal sustainability of the U.S. government, with the 10-year Treasury yield reaching 4.8% and climbing steadily in recent weeks, its highest level since the 2008 financial crisis.
The sell-off in Treasury bonds with maturities of 10 years or more, which has caused yields to soar, is surpassing some of the most severe market downturns in history, with losses of 46% and 53% since March 2020, comparable to stock-market losses during the dot-com bubble burst and the 2008 financial crisis.
The chaos in the bond market is largely attributed to the Federal Reserve, as panic over higher interest rates has led to a selloff in long-dated Treasurys, although some market experts believe this panic is disconnected from market fundamentals and that interest rates are unlikely to remain high for long.
The US bond market experienced a selloff due to strong US hiring data, raising expectations of further interest rate hikes by the Federal Reserve this year.
Long-term bond yields have surged as the Federal Reserve reduces its bond portfolio and the U.S. Treasury sells debt, contrary to the expectations of Wall Street and investors worldwide, but a research paper written by a University of Michigan student six years ago accurately predicted this scenario.
The gold market has experienced nine consecutive days of losses, its longest losing streak in seven years, due to surging bond yields, but rising bond yields also pose significant risks for the economy, creating potential for short-term challenges and a potential breakdown in the U.S. dollar's international appeal.
The collapse in Treasury bonds is one of the worst market crashes in history, with experts predicting that a recession could hit in 2024 and 10-year Treasury yields could breach 5.5%.
The bond sell-off that is currently occurring in global markets is raising concerns of a potential market crash similar to the one that happened in 1987, with experts noting worrying parallels between the two eras, due to the crashing bond markets, increasing debts, overstretched equity markets, and the end of a bull market, albeit with no fiscal room for policy makers to respond this time, raising the potential for a more catastrophic event, including soaring interest rates and increased national debt servicing costs.
The Treasury bond market sell-off has led to a significant crash, causing high yields that are impacting stocks, commodities, cryptocurrencies, housing, and foreign currencies.
The bond market has experienced its worst annualized returns in 20 years, leaving investors with significant losses and challenging traditional views of bond investments as safe and fixed income.
The US bond market is experiencing its largest sell-off in history, with benchmark yields increasing by five times since the end of 2020, and BlackRock predicts that the climb will continue due to factors such as inflation, higher interest rates, and rising US debt.
Investors are closely monitoring the bond market and September CPI data to determine the Fed's stance on interest rates, with Seema Shah of Principal Asset Management highlighting the circular nature of market reactions to yield spikes and their subsequent declines. She suggests that while there are concerns about upward momentum, the equity market will find comfort in a continued drop in yields and could remain range-bound for the rest of the year. Diversification is recommended as the market narrative remains unclear, and investors may consider waiting until early 2024 for greater clarity on the economy and the Fed's actions.
The US Treasury market experienced its biggest single-day rally since the collapse of Silicon Valley Bank in March, as investors sought the safety of US bonds amid escalating tensions in the Middle East and growing expectations that the Federal Reserve may pause its rate hike campaign.
A rise in bond yields and volatility, coupled with weak market breadth, suggests a potential market sell-off, as highlighted by the author's analysis.
