In the US securities market, the last indicator of the approaching recession

In the United States, for the first time since 2007, the return on two-year and ten-year treasury bonds occurred. The situation when the yield of short-term securities is higher than the yield of long-term bonds is extremely rare and almost always is a harbinger of economic recession.

Фото: Depositphotos

As of the morning of August 14, the yield of two-year bonds exceeded the yield of ten-year bonds at 1,2 basis point, writes RBC with reference to Bloomberg.

According to MarketWatch, the yield on two-year Treasuries is 1,632% per annum, and the yield on 10-year Treasuries is 1,624%.

Back in early August, the difference in yields was 16 basis points in favor of long-term bonds. On Monday, August 12, the spread narrowed to 6 points, on Tuesday - to 3 points.

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The last time the inversion of yields on two-year and ten-year US government bonds was observed in 2006 – 2007. And the maximum difference in favor of ten-year securities was recorded in 2011 - then long-term securities rates exceeded the yield of short-term ones by almost 290 basis points, or 2,9%. Typically, investors require at least 1% additional yield on ten-year securities.

The inversion of the yield curve is considered the most reliable indicator of the upcoming economic recession in the United States. Normally, the yield on longer bonds is higher than the yield on short-term securities, since the risk of losses on investments for a longer period is higher than on a short one - investors require bonuses for this risk. When an inversion occurs, this may mean that investors see more risk in the short term than in the long term.

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Since the 1978 of the year, the inversion of returns has always been followed by a recession - in five cases, including the 2007 of the year. The yield curve for two- and 10-year bonds turned over before the recessions of the 1981, 1991, 2000 and 2008 years. It preceded all nine crises in the United States since 1955.

Earlier, other sections of the yield curve of US government securities were inverted. In particular, in March, the yield on three-month treasury bills became higher than the yield on ten-year government securities. US GDP in the first quarter of 2019 of the year grew by 0,8% compared to the previous quarter, but in the second quarter growth slowed to around 0,5%.

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