30-year Treasury slumps to historic low as recession fears spike
The 30-year Treasury bond yield fell to a historic low on Thursday, slumping below 2 percent for the first time ever amid fears of an impending global recession, which pushed markets lower around the world.
After dipping below 2 percent, the 30-year yield was hovering around 1.99 percent on Thursday morning, which is slightly below official interest rates.
That development came after the spread between the 10-year and 2-year Treasury notes — a closely watched point that has historically preceded recessions when it inverts — turned negative for the first time in 12 years. It’s rare for short-term interest rates to go higher than long-term rates, because lenders generally require a higher interest rate to lend for longer periods of time, due to a bigger inflation risk or the increased possibility of defaulting.
“The yield curve inverting is a worrisome sign, but don’t forget it isn’t the best timing signal, as a recession doesn’t start for an average of 21 months after the initial inversion,” said Ryan Detrick, senior market strategist for LPL Financial. “Given the continued strong employment picture and healthy U.S. consumer, there could still be time for this economic cycle to have plenty of life left.”
During an interview with FOX Business on Wednesday, former Federal Reserve Chair Janet Yellen cautioned that this particular point on the yield curve might not be forecasting a recession this time around.
“I would really urge on this occasion it may be a less good signal,” she said. “And the reason for that is that there are a number of factors other than market’s expectations about the future path of interest rates that are pushing down long-term yields.”
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