"De-inverting" yield curve is the new "inverting yield curve" recession warning

<p>An inverted yield curve refers to a situation in the bond market where longer-term debt instruments have a lower yield than shorter-term debt instruments. </p><ul><li>Typically, longer-term bonds have higher yields than shorter-term bonds to compensate investors for the additional risks associated with holding an asset over a longer time frame, such as inflation risk or greater price volatility.
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An inverted yield curve is often viewed as a signal of an impending economic recession. </li></ul><p>

You may recall all the warnings of an immenent recession when the yield curve inverted in recent years. </p><p>So far, no recession though. </p><p>

Now its all about a 'de-inverting' yield curve. </p><ul><li>The spread between the two-year and 10-year Treasury bonds has started to narrow. </li><li>The 2-10 year yield curve is starting to de-invert as the 10-year Treasury note moved past a 16-year-high to edge closer to the two-year bond.
</li></ul><p>JP Morgan:</p><ul><li>
"This very recent move in Treasurys has been a little bit more dangerous," </li><li>"I think the move in the Treasury market, the disinversion of the curve, I think that actually makes a hard landing much more likely,"</li><li> It's the highest real rates have been since 2009, a sign that the economy is bound to feel more pain from a higher cost of borrowing.

"That's going to hurt businesses. That's going to hurt consumers. It's just going to take some time," </li></ul><p>Also, 'bond king' Jeffrey Gundlach:</p><ul><li>

"The US Treasury yield curve is de-inverting very rapidly," </li><li>

That "should put everyone on recession warning, not just recession watch," </li><li>"If the unemployment rate ticks up just a couple of tenths it will be recession alert. Buckle up."</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.