Treasury bond yields are the one bubble in the marketplace: Economist

CFRA Investment strategist Lindsey Bell, First Trust Advisors chief economist Brian Wesbury and Janney Montgomery Scott strategist Mark Luschini discuss how the U.S.-China trade war is affecting the markets, the Federal Reserve’s rate hikes and the concerns over the yield curve.

The robust economic data has not translated well into financial markets as a flattening yield curve is prompting concerns of a looming inversion that may signal a recession to follow, according to First Trust Advisors’ Brian Wesbury.

“I think these bond yields, it’s the one bubble I see in the marketplace,” Wesbury told FOX Business’ Charles Payne on Thursday.

The yield on the 10-year Treasury note has retreated to 2.9 percent after reaching its peak of 3.26 percent in November. Bond prices move in the opposite direction of yields.

The Federal Reserve, with its telegraphed fourth interest rate hike of the year, has become a challenge for banks to make money as the yield curve compresses against fluctuating interest rates.

“If they can’t make money, loans aren’t flying off the shelf, it’s a problem for the banks,” CFRA Investment’s Lindsey Bell said.

The Fed, which has raised interest rates three times this year, is widely expected to hike a fourth and final time on December 19, at the conclusion of its two-day policy meeting.