The Bond Market Is Saying Scary Stuff

The bond market has gone through the looking glass, taking us on a miserable adventure in whatever the opposite of Wonderland is.

Yes, the moment we’ve all been waiting for/dreading has arrived: Ten-year Treasury notes this morning briefly yielded less than two-year Treasury notes. You’re excused if you have not, in fact, been waiting for this moment or even know what those words mean. But this esoteric event – an “inversion” of one part of the “yield curve” – is widely seen in the market as a reliable signal of a recession in the near future. Other parts of the curve have been inverted for a while, but this may clinch it. Stocks, which yesterday rose on hopes of a trade-war truce, cratered. The bond market, which had no such optimism yesterday, notes Robert Burgess, once again wins the award for prescience.