Eggs will be available for sale on February 25, 2025 at a Manhattan grocery store in New York City.
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The Fed once again raised its head in the bond market considering a near-confirm recession signal.
The 10-year fiscal yield is lower than the 3-month notes traded on Wednesday. In market terminology, this is called a “return earnings curve” and its recession time is lower by decades over the 12-18-month timeframe, its forecast record.
In fact, the New York Fed believes this is a reliable indicator Provide monthly updates This relationship, as well as the percentage of the recession, over the next 12 months.
At the end of January, when the 10-year yield was about 0.31 percentage points in three months, the probability was only 23%. However, this will almost certainly change, as the relationship changed dramatically in February.
10 years and 3 months curve
“This is what people expect if investors take a larger risk aversion attitude due to growth panic,” said Joseph Brusuelas, chief economist at RSM. “It’s unclear if there is more noise or if we will see a more obvious signal of economic activity.”
Although the market follows a closer relationship between the 10-year and 2-year notes, the Fed prefers to measure 3 months because it is more sensitive to movements of central bank federal funding rates. The 10/2 year spread has remained relatively small positive, although it has also flattened significantly in recent weeks.
10-year 2-year earnings curve
To be sure, the yield curve reversal has a strong but imperfect prediction history. In fact, the previous reversal occurred in October 2022. Still no recession 2½ years later.
So while this uncertain growth will turn into a negative impact, investors are concerned that the president’s ambitious agenda is expected to grow Donald Trump Probably not happening.
Economic barriers arise
The 10-year yield surges after the presidential election on November 5, 2024. Based on the beginning of the profit When Trump rose in September’s polls, it peaked about the week before the inauguration on January 20. Often, this is a clear sign that investors expect more growth, although some market professionals also see it as an expression of inflation concerns, and amid the growing debt and deficit problems of the U.S. government, investors Require additional yields investors request. .
Earnings have fallen since Trump took office last month. The 10-year period fell by about 32 basis points or 0.32 percentage points, as investors feared Trump’s tariff-centric trade agenda could soar and grow slowly during the inauguration. Now, starting from Election Day, the output of the benchmark has basically not changed.
10-year rate of return
“We do need to have a lot of small potholes on the road,” said Tom Porcelli, chief economist at PGIM fixed income. “What’s happening, especially all the uncertainty around tariffs is at all A very tall magnifying glass is placed on these cracks. People are now starting to cheer up and pay attention to that.”
Recent sentiment surveys reflect consumer and investor anxiety as the outlook slows with inflation boosting, just as it seems to be relaxing.
In the University of Michigan monthly survey, respondents made a long-term view of inflation over the next five years (the highest level since 1995). Conference Committee Report Its forward-looking expectation index aligns the recession in February.
Nevertheless, most “hard” economic data, such as consumer and labor market indicators, remain positive even in the face of adverse emotions.
“We’re not looking for a recession,” Poseli said. “We don’t want one. But we expect more economic activity to be softer in the coming year.”
The market also has the same view on weaker activity.
In response, traders are now pricing at least half a percentage point lowered from the Fed’s lower interest rates this year, meaning central banks will relax as growth slows. CME Group’s FedWatch Measure futures prices. Chris Rupkey, chief economist at FWDBONDS, said the bond market smelled “aerial recession.”
However, Rs also said he is not sure if the recession will actually happen because the labour market has not yet indicated that people are coming.
He said that “inversion of the output curve” is a pure role in the economy. “I don’t know whether we are predicting a mature recession or not. You need the loss of work from a recession, so we are missing a key point in the data.”
