As the Treasury reverses yields, traders weigh the risk of a U.S. recession

Bond markets continued to flash warning signs on Monday that the US economy could head into recession after the US Treasury yields reversed.

Yields on the 2-year Treasury Yield rose slightly to 2.438 near 11:30 am ET, while the benchmark 10-year Treasury Note rose 4 basis points to 2.419%. The yield on 5-year government bonds rose slightly to 2.557% and 30-year Treasury bonds rose nearly 5 basis points to 2.479%. Yield goes up in price and 1 basis point equals 0.01%.

The 2-year and 10-year yields, which form a major part of the yield curve seen by traders, reversed on Monday. Those Treasury yields flipped Thursday for the first time since 2019 and did so again on Friday after the release of closely watched job data.

Treasury yields have historically occurred before the recession, although economists have noted that this is not a guarantee of an economic recession. The 5-year and 30-year Treasury yields have also been reversed, one week ago for the first time since 2006.

Meanwhile, investors’ focus will be on the minutes from the Fed’s latest meeting this week, due to be out at 2pm ET on Wednesday.

ING strategists said in a note on Monday that they expected the Fed to announce a 50 basis point rate hike at its May, June and July meetings.

“It should lead to higher yields across the board, but the curve should be reversed further,” they said.

Investors are also monitoring the situation in Ukraine. Russia’s chief negotiator Vladimir Medinsky says talks on a draft peace deal will resume on Monday, noting that the Kremlin’s position on Crimea and Donbass remains unchanged.

Ukrainian President Volodymyr Zelensky has accused Russian forces of genocide, saying the Ukrainian people were “being destroyed and annihilated.”

CNBC’s Jesse Pound and Sam Meredith contributed to this market report.

Leave a Reply

Your email address will not be published.