In this weekend report, From London on Saturday, March 23rd, 2019 I look at some ominous signs given by the bond markets all around the world this last week.
With both the ECB in Europe and the Federal Reserve in the U.S. has now given up on normalizing their monetary policy after over a decade of emergency measures we saw massive red flags or warnings from the government bond markets this week.
The most significant incident was the U.S. 3-month t-bill yield rising above the U.S. Treasury 10-year note yield yesterday. In the last 50 years every time this yield curve inversion ( short term rates are normally lower than longer-term rates) it has signaled an economic recession within the next 12 months.
We have also seen in the last couple of recessions after the Dot.com Bubble and the Housing Bubble that the chance of a financial accident or crisis is very high. Will this next recession be the unwinding of the Everything Bubble engineered by the Central Bankers in the last decade?
My conclusion is that we should not expect the Central Bankers to do anything differently even though the zero, negative rates and money printing have not really worked!
Video from March 2nd, 2019: U.S. Economy Running on Fumes:
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Yes that yield curve is looking inverted. Cheers