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Fed Policy Fears Pressure, Flashing Recession Indicators

Fears that the Federal Reserve’s policy tightening would slow the economy reignited again in Wednesday!

As many argue and indeed widely speculate about recession indicators flashed in the bond market

Tweet on Recession fears

Tradeweb chart on Fed projection

The yield on the 10-year U.S. Treasury, a benchmark for borrowing costs, fell to 3.732%.

That’s below the federal-funds rate of 3.83%, but also lower than the Fed’s targeted policy-rate floor of 3.75%.

The typically positive yield curve—the spread between 10-year and two-year yields—dropped to its most inverted since 1982.

Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said the specific indicators don’t carry much weight on their own. Rather, he notes that lower borrowing costs lessen the impact of Fed tightening on the stock market, making higher interest rates that much more certain.


Soure; Tradeweb/WSJ