BlockBeats news, September 10, DataTrek co-founder Nicholas Colas said that the long-expected shift in the relationship between 2-year and 10-year Treasury yields was not the only recession warning from the bond market last Friday.
The sharp drop in the 2-year Treasury yield also pushed the spread between short-term notes and the federal funds rate to the most negative level in at least 50 years. Colas pointed out that during this period, the spread between the two short-term interest rates fell below -1% only three times, and each time this happened, the recession began within a year. However, Colas does not think this will necessarily lead to a recession. He said that a recession requires a catalyst to start, and so far, nothing has happened in the United States that could trigger such a sharp economic slowdown.
On the contrary, this inversion shows that bond traders are increasingly worried that the Federal Reserve has not reduced borrowing costs in a timely manner amid a slowing labor market. "The U.S. bond market is saying that the Federal Reserve is far behind the situation in terms of rate cuts," Colas said in a report on Monday. (Jinshi)