Recession or not? The bond market is screaming one thing, but pricing in something else

The $24 trillion Treasury market, a reliable predictor of past U.S. recessions, has been flashing the same signal for a while: The Federal Reserve’s use of higher interest rates to tame inflation likely will hurt the economy.

See: Bond-market recession gauge plunges further into triple digits below zero after reaching four-decade milestone “There will come a point when the tightening of financial conditions is such that businesses have to lay off workers, and a good chunk of job openings disappear,” Skiba said. “That is what is giving some chance of a soft landing over the coming quarters, instead of a more traditional expectation of a recession,” Skiba said. “In our opinion, it’s a close call.”

Given the uncertain backdrop for short-term Fed rates, it makes sense that the policy-sensitive 2-year Treasury yield TMUBMUSD02Y this week shot above 5%, the highest since 2007.

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Source: CNBC - 🏆 12. / 72 Read more »