Global bond yields continue to fall as as recession fears haunt markets

One by One Global Bond Markets Are Flashing the Same WarningMore

Given the plethora of factors that impact the yield curve as well as mixed signals on the economy and a tergiversation in short-term yields, investors should be mindful that what matters is the duration of the inversion and what the long-term impact will be for bond yields as well as the stock market.

Since when was the Federal Reserve's dovish about-face bad for markets?

Meanwhile, the S&P/ASX 200 index traded 0.37 percent lower at 6,104.50 by 03:35GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 28.75 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

Quantitative Easing Helping drive long-term yields lower and invert the curve is investors' growing belief that central banks will quickly step in - beyond just cutting rates - and support the economy if things look dire, including buying more bonds.

Moneycontrol's Jerome Anthony does 3 Point Analysis on what the inverted yield curve means for India.

Investors have been spooked by sharp falls in USA bond yields and an inversion of the U.S. treasury yield curve, which is widely seen as an indicator of an economic recession.

San Francisco Fed researchers have said that the difference in those two maturities was the most useful for forecasting a recession.

The speed of the decline in U.S. Treasury yields has also been fueled by a wave of mortgage-related hedging in the swaps market, said Credit Agricole's Li. This part of the yield curve has a similar history: It predicted a recession in the early 1990s; it inverted in 1986, 1998 and 2000 without a subsequent Canadian recession; and it failed to see the oncoming recession in 2015.

The Treasury Department will sell US$113 billion (RM459 billion) in coupon-bearing supply this week, including US$40 billion in two-year notes today, US$41 billion in five-year notes tomorrow and US$32 billion in seven-year notes on Thursday.

Investors will also be watching Fed policy makers scheduled to speak on Tuesday. "For now we have to see this week's auctions", he said.

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"What we have is lots of signs of slower growth", Warne said.

Fed funds rate futures are now fully factoring in a rate cut later this year, with about an 80 percent chance of a move priced in by September.

The dollar index, which measures the US dollar against a basket of currencies, rose 0.16 percent, with the euro down 0.14 percent to $1.1248.

In the currency market, the fall in United States yields undermined the dollar's yield attraction.

But experts caution investors against starting to panic.

The British pound stood at US$1.3180, erasing small gains made after lawmakers voted to wrest control of the Brexit process from Prime Minister Theresa May's government for a day.

Benchmark U.S. Treasury debt yields fell to their lowest since late 2017 on Monday and a gauge of world stocks dropped for a second straight session on persistent concerns over global economic growth.

United States crude futures traded at $59.55 a barrel, up 0.75% on the day but below Thursday's $60.39, which was its highest level since mid-November.

Brent futures were up 0.7 per cent at $US67.73 while safe-have gold was down a third of a per cent at $1317.60 having hit a one-month high of $1324.60 on Monday.

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