US: Yield curve inversion revives concerns over economic slowdown

The sharp fall witnessed in the U.S. T-bond yields this week caused a yield curve inversion for the first time since the financial crisis presented by the yield on the 5-year note dropping below the yield on the 2-year note.  

Commenting on this development, Jeffrey Gundlach, chief executive officer of DoubleLine Capital, said that the yield curve inversion on short end maturities was a signal that the economy was poised to weaken.

 “If the bond market trusts the Fed’s latest words about ‘data dependency,’ then the totally flat Treasury Note curve is predicting softer future growth (and) will stay the Fed’s hand. If that is indeed to be the case, the recent strong equity recovery is at risk from fundamental economic deterioration, a message that is sounding from the junk bond market, whose rebound has been far less impressive," Gundlach added.

As of writing, the 10-year bond yield was down 2.65% at 2.912%, the 5-year bond yield was losing 1.83% at 2.787%, and the 2-year bond yield was dropping 1% at 2.805%.