Recession Signal Getting Louder: 5-Year Yield Inverts With 3-Month Yield

The yield curve is inverted in 11 different spots. The latest is 5-year to 3-month inversion.

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_5-47-38.jpg?itok=PW46u5cc

The yield curve recession signal is louder and louder. Inversions are persistent and growing.

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2810%29_1.jpg?itok=a4nvYnOV

Let’s compare the spreads today to that of December 18, the start of the December 2018 FOMC meeting.

Yield Curve 2019-02-26 vs December and October 2018

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2811%29_1.jpg?itok=fBQyAcf-

Yield Curve Spread Analysis

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2812%29_1.jpg?itok=rSGh9O9m

Spread Changes

  • Yellow: Spreads Collapsed Since October (1 Month to 5 Years)
  • Pink: Spreads Remained Roughly the Same (7 Year)
  • Blue: Spreads Increased (30-Year and 10-Year)

Something Happening

Something is happening. What is it?

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_5-51-51.jpg?itok=EnviRvls

Possibilities

  1. The bond market is staring to worry about trillion dollar deficits as far as the eye can see
  2. The bond market has stagflation worries
  3. The bond bull market is over or approaching

My take is number one and possibly all three.

An in regards to recession the economy is weakening fast.

Source: by Mike Shedlock via MishTalk| ZeroHedge

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Core US Factory Orders Suffer Worst Slump In 3 Years

US core factory orders (ex transports) fell for the second month in a row in December. This is the worst sequential drop since Feb 2016.

New orders ex-trans fell 0.6% in Dec. after falling 1.3% the prior month.

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_7-13-00.jpg?itok=bUbibSEj

The headline factory orders rose 0.1% MoM (well below the 0.6% MoM gain expected).

Capital goods non-defense ex aircraft new orders for Dec. fall 1% after falling 1.1% in Nov.

Non-durables shipments for Dec. fall 1% after falling 2% in Nov.

Not a pretty picture, but it was an 8.0% drop in Defense spending that triggered the weakness – so we’re gonna need moar war.