CEO of BDSwiss Middle East, Daniel Taqi El-Din, said that the inversion of a major part of the yield curve of the US Treasury for the third time last week is a strong indicator of recession.
He added in an interview with Al-Arabiya channel, “This has happened 8 times since 1969, and this is the most important news and investors are following the inversion of the yield curve, especially since historically it is always considered to precede entering a recession.”
He explained that short-term returns, which are more sensitive to tightening policies and raising interest rates, usually rise more than long-term returns, which are more sensitive to inflation and economic growth.
He pointed out that the US Federal Reserve was in a dilemma before the war, and this dilemma is big now, especially after the Ukraine war.
US government bond yields resumed their rally on Friday with a major part of the US Treasury yield curve inverting for the third time last week, in a clear sign of persistent inflation and amid concern that the Federal Reserve may raise rates faster than previously expected.
The yield curve inverts or inverts when the yield on shorter-term bonds becomes higher than the yield on longer-term bonds, which economists consider a warning of an expected recession within a year or two.
The yield on the two-year note rose more than 13 basis points to 2.47%, surpassing the yield on the 30-year note for the first time since 2007 and moving further away from the yield on the 10-year note.
This came after data was released that showed the unemployment rate in the United States fell to 3.6% after adding 431,000 new jobs in March.