Is a Flattening Yield Curve a Sign of an Impending Recession?
Yields in the shorter timeframe such as the two-year yield (SHY) and T-notes (SCHO) are rising more than the ten-year or the 30-year (TLT) yields.
The US unemployment rate is close to the desired 4.5% and inflation has moved closer to the Fed’s target rate of 2.0%.
Bond markets (BND) have been buzzing about the flattening US Treasury yield curve. In this series, we’ll explore what this means and how it’s becoming a concern for global markets.
The US Dollar Index lost momentum at the end of last week and closed the week almost flat. It started this week on a positive note.
US Treasuries (GOVT) had a mixed response to the FOMC statement and the Fed’s interest rate hike.
The US dollar regained strength on Thursday and closed the day at one-month high price levels. The US Dollar Index is stable in the early hours on Friday.
The US ten-year yield fell to 2.1% after the weak US data report, US inflation showed a decline of 0.1%, and retail sales fell by 0.3% for May 2017.
In her post-meeting press conference, Janet Yellen warned that the Fed could implement its balance sheet unwinding process soon if the economy continues to perform as expected.
The US Dollar Index started the week on a weaker note and fell for three consecutive trading days. It regained strength later on June 14.
In the early hours on Wednesday, the US Dollar Index is slightly weaker. At 5:45 AM EST on June 14, the US Dollar Index was trading at 96.99—0.01% higher.
After gaining some strength last week, the US Dollar Index was stable on June 12. The US Dollar Index is slightly weaker in the early hours on Tuesday.
Bond yields of U.S. Treasuries managed to recover from the losses of the previous week. Demand for US bonds receded.
The US Dollar Index regained some strength and pulled away from seven-month low price levels. The US Dollar Index is stable early on June 12.
Tobacco bonds have been volatile in the last seven years. Falling MSA payments caused the volatility. Tobacco bonds offer relatively good cash flow returns.
Tobacco bonds could still be a decent investment. When there’s a default, tobacco bonds behave differently than corporate bonds.
Tobacco bonds are a highly liquid, large, and high-yielding sector. Tobacco bonds belong to the municipal high-yield bond market (HYD).
The London attack has added to the political uncertainty that is prevailing in the UK—and only days before its general elections scheduled for June 8.
Bond yields have slipped on the latest US non-farm payroll data but also on the reduced probability of 2017 interest rate hikes by the Fed.
The US dollar started the week with mixed sentiment and consolidated. Sentiment in the US dollar has been dented amid political turmoil in the US.
US markets (ITOT) have continued to rise since the US election and have remained in positive territory in the last six months.