Bond market signals recession?

 PJ Media:

A key recession indicator in the bond market began flashing red on Monday morning as the yield on five-year Treasury notes increased to 2.64%, which was higher than the yield on 30-year notes, which dropped to 2.60%. This “inversion” happened for the first time since 2006.

The two notes remained flattened as of Monday afternoon, with the five-year yield sitting at 2.55% and the 30-year at 2.57%. And other key indicators — including the spread between the two-year and ten-year yield — remained positive through Monday.

Yield curve inversions show that investors have little faith in growth in the future. But with other indicators in flux, most investors see the inversion as signaling a possible recession in the near future.

...

Bond traders facetiously call this a yield rally.   As the yield goes up the price for existing bonds with a lower rate goes down so that the new buyer of that bond will get the same yield as the new bonds.  The higher the current rate on bonds goes up the value of the existing bonds goes down.  This generally happens in sync with the Fed yields.

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