Treasury curve inverts as trade war threats linger

Monday, 26. August 2019 18:32

As stocks continued to trade with strong gains on Wall Street on Monday after the latest remarks by United States President Donald Trump at the summit of the Group of Seven, Treasury debt prices surrendered most of the gains, which means yields were off session lows. However, the spread between the 10-year and two-year measures turned negative again, indicating risk-off sentiment. The inversion in the most widely watched part of the yield curve is seen by many investors as a precursor to a recession, like before all downturns in the US in the past half of a century.

The phenomenon occurred several times in the past week including earlier today as measures and the rhetoric in the trade war with China escalated. Trump has walked back some of his threats but markets are still waiting for a convincing response from Beijing. Gold and silver were also in the green amid demand for safe haven assets.

The two-year yield rebounded to 1.539% at 12:29 pm ET or 1.2 basis points up for the day. The ten-year rate was slightly down at 1.534%. The yield on 30-year bonds was little changed at 2.029%. Corresponding futures prices were 0.03% in the red, 0.02% up and 0.04% lower, respectively. Yields move inversely to prices.

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