Remember Monday when stocks jumped and the yield curve steepened and every talking head and their pet rabbit said the bond market is about to explode... well the yield curve is now imploding again with 5s30s crashing almost 10bps to 64bps - the lowest since Oct 2007.
The trend is jnot The Fed's friend...
This morning Fed's Bullard warned that more rate-hikes could invert the yield curve (which has signal 7 of the last 7 recessions).
“There is a material risk of yield curve inversion over the forecast horizon if the FOMC continues on its present course of increases in the policy rate," Bullard, who doesn’t vote on the policy-setting Federal Open Market Committee until 2019, said on Friday in Arkansas.
“Yield curve inversion is a naturally bearish signal for the economy. This deserves market and policy maker attention.’’
Hoever, last night Cleveland Fed President Loretta Mester on Thursday played down concerns about the yield curve, instead advocating continued gradual increases in the federal funds rate.
“Long rates are going to go up given where we are in the economy and given where we see the economy going,” she said in an interview.
“But this is another reason why we need to keep raising up the short rate. These financial conditions are accommodative.”
So Bullard rightly worried, Mester - it's different this time.